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Financial sector reforms in adjustment programs


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  • Gelb, Alan
  • Honahan, Patrick


The typical financial sector reform package involves policy changes to increase the power of centralized decision making in some areas and to reduce it in others. For regulation and supervision, reforms seek strengthened information systems, stronger and more detailed regulations, and closer credit supervision. At the level of the intermediaries, reforms seek improved procedures, some of which (credit policies, loan review) are natural complements to improvements at the central level. But insofar as the relative cost and availability of credit are concerned, the typical reform program calls for a reduction in government control, and tries to broaden the range of options for finance. Experience has shown the importance of the links between the financial sector policies and performance and the macroeconomic situation. Without an adequate degree of macroeconomic stability, financial sector reforms can fail, with serious consequences. Therefore the planning of a financial sector reform must be predicated on an appropriate macro-policy framework.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 169.

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Date of creation: 31 Mar 1989
Date of revision:
Handle: RePEc:wbk:wbrwps:169

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Keywords: Insurance&Risk Mitigation; Banks&Banking Reform; Financial Intermediation; Economic Theory&Research; Financial Crisis Management&Restructuring;


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  1. Gonzales Arrieta, Gerardo M., 1988. "Interest rates, savings, and growth in LDCs: An assessment of recent empirical research," World Development, Elsevier, vol. 16(5), pages 589-605, May.
  2. Diaz-Alejandro, Carlos, 1985. "Good-bye financial repression, hello financial crash," Journal of Development Economics, Elsevier, vol. 19(1-2), pages 1-24.
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Cited by:
  1. Hanif, Muhammad N., 2002. "Restructuring of Financial Sector in Pakistan," MPRA Paper 10197, University Library of Munich, Germany.
  2. Claudio E. V. Borio, 1990. "Financial arrangements, 'soft' budget constraints and inflation: lessons from the Yugoslav experience," BIS Working Papers 15, Bank for International Settlements.


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