Controversial Austerity Plan by International Financial Institutions (IFIs). What can be done to protect the vulnerable segment of the population?

In economics, austerity is when a government reduces its spending and/or increases user fees to pay back creditors. Austerity is usually required when a government's fiscal deficit spending is felt to be unsustainable.
Austerity measures are typically taken after a government's bond rating is downgraded, making it more expensive to borrow money. Government bonds are typically downgraded when debt grows substantially as a portion of GDP (The gross domestic product (GDP) or gross domestic income (GDI) is a measure of a country's overall economic output. It is the market value of all final goods and services made within the borders of a country in a year). Government debt grows as spending exceeds tax revenue. Such excess occurs when tax rates are such that revenues are kept low while government spending is increased. Such excess can also occur when the economic activity stagnates or decreases, such as in a recession, thereby reducing the government's tax revenue
Banks, or inter-governmental institutions such as the International Monetary Fund (IMF), may then require that an indebted government pursue an austerity policy. This typically occurs when the government must refinance (Refinancing refers to the replacement of an existing debt obligation with a debt obligation bearing different terms) loans that are about to come due, for which the government cannot pay. The government may be asked to stop issuing subsidies (financial assistance paid to a business or economic sector) or to otherwise reduce public spending. When the IMF requires such a policy, the terms are known as 'IMF conditionalities'.
Austerity measures, which have caused untold hardships in developing countries, especially in Africa, are now been experienced in the centre of Europe. In Africa, the forceful imposition of hash conditionalities in order to carry out the so-called structural adjustment programs (SAPs) under the auspices of the IMF-world bank, caused, hunger, diseases, political instability leading in most cases to war as well as robbing the affected counties of their sovereignties. SAPs emphasize maintaining a balanced budget, which forces austerity programs. The casualties of balancing a budget are often social programs.

The programs most often cut are education, public health, and other miscellaneous social safety nets. Commonly, these are programs that are already under funded and desperately need monetary investment for improvement.

For example, if a government cuts education funding, universality is impaired, and therefore long-term economic growth. Similarly, cuts to health programs have allowed diseases such as AIDS to devastate some areas' economies by destroying the workforce. Recent studies have shown strong connections between SAPs with Tuberculosis rates in developing nations.
The adjustment programs usually involve cutting public spending, devaluing the national currency to stimulate exports and reducing imports, causing governments to reduce subsidies on food staples, education, medicines, and other welfare programs.

The situation in Greece appears like a dejavu to me, but this time in Europe. The people of Greece know exactly the effects of such austerity measures. That is why they are fighting tooth and nail to block its imposition.
Austerity programs are frequently controversial both in developed and developing countries, as they have an impact on the poorest segments of the population. In many situations, austerity programs are implemented by countries that were previously under wasteful or dictatorial regimes, leading to criticism that the citizens are forced to repay the debts of their ill responsible leaders. Development projects, welfare, and other social spending are common programs of spending for cuts. Taxes, port and airport fees and train and bus fares are common sources of increased user fees.

According to a United Nations report, Austerity measures imposed on the poorest countries by the International Monetary Fund as a condition for new loans have produced no tangible results.
''I guess you could say the sacrifices have been in vain,'' said, an official of the United Nations Conference on Trade and Development, referring to the reductions in social spending and the drop in living standards the austerity measures have caused.
That is one of the conclusions of the conference's annual report. The Geneva-based body is the main United Nations agency promoting the economic interests of the developing countries. The agency has often criticized the ways that industrialized countries have responded to economic conditions in poor nations.
The report says there is a troubling split in world economic performance. While healthy growth has continued, in the industrialized countries and in several developing countries - mainly in eastern Asia - the economies of the developing countries of Africa and Latin America have stagnated or worsened. The report attributed much of their plight to their large foreign debts.
Recent initiatives, particularly by the international community especially United States and France, to forgive part of the debt are extremely welcome and positive. However it is arguable that these measures would provide only about half the minimum debt reduction needed to spur economic growth.
The report examined the results of the adjustment programs adopted by the least developed countries to qualify for new I.M.F. loans. The United Nations has put 42 nations, with a combined population of more than 400 million, in this category. They all have very low per-capita income levels.
The report found that of the 12 least developed countries, which have applied such programs for most of the 1980's, the growth rates of only three - Bangladesh, Gambia and Mali -were above the average for all the least developed countries. ''The adjustment programs in the least developed countries have so far produced mixed results and achieved, at most, limited success,'' the report said. Detrimental Effects
The report said that often the main result of these programs had been a contraction of economic activity. Currency devaluation ''had little effect in stimulating exports in the least developed countries, but certainly created hardship, particularly to vulnerable groups,'' by raising prices, the report said.
What is needed, it continued, is increased debt relief, more flexible adjustment programs, with social safety nets and better access to industrialized countries' import markets.