Structural adjustment contributes to environmental degradation through its manic emphasis on promoting exports, including especially agricultural and resource exports, as well as through its undermining of enforcement of environmental regulations. Here is how Friends of the Earth describes the problem in a recent report, "IMF: Selling the Environment Short."

"One major goal of structural adjustment programs (SAPs) and stabilization programs is to generate foreign exchange through a positive trade balance. To meet the IMF's ambitious targets for currency reserves and trade balance, countries must quickly generate foreign exchange, often turning to their natural resource base. Countries often over-exploit their resources through unsustainable forestry, mining and agricultural practices that generate pollution and environmental destruction, and ultimately threaten future exchange earnings."

"[E]xports of natural resources have increased at astonishing rates in many countries under IMF adjustment programs, with no consideration of the environmental sustainability of this approach. Furthermore, the IMF's policies often promote price-sensitive raw resource exports, rather than finished products. Finished products would capture more added value, employ more people in different enterprises, help diversify the economy and disseminate more know-how."

"Structural adjustment and stabilization also aim to generate positive government budget balances. In the effort to rapidly trim budget deficits, governments are forced to make choices, and inevitably, the environment loses. Decreased spending weakens government ability to enforce environmental laws and diminishes efforts to promote conservation. In addition, governments are told to increase private investment and to reduce the role of the state in favor of private sector development. Budget priorities are often directed toward business promotion, creating a further strain on cash-strapped environmental enforcement agencies. ... Governments may also relax environmental regulation to meet SAP [structural adjustment program] objectives of increasing foreign investment, as occurred in the case of the Philippines."

As one example of how IMF-mandated budget cuts can hurt the environment, Friends of the Earth points to the Brazilian Amazon forest: "Because of IMF budget restrictions, as of July 1999, funding for the enforcement of environmental regulations and supervision programs was reduced by over 50 percent. ... The Brazilian Institute for the Environment and Renewable Natural Resources, responsible for implementing Brazil's environmental and conservation protection programs, had expenditures that totaled only 16.28 percent of its budget."

The IMF says it defers consideration of the environmental effects of structural adjustment to the World Bank, but as Friends of the Earth points out, "The World Bank has failed to provide environmental guidance to the IMF, and is even delinquent in assessing the environmental impacts of its own structural adjustment loans," Friends of the Earth concludes. "A recent internal World Bank study found that fewer than 20 percent of World Bank adjustment loans included any environmental assessment."