Discuss FOUR ways an adverse balance of payment can be corrected. – NABTEB QUESTION

Ways through which an adverse balance of payment can be controlled are:

(i) Increasing export: An increase in production in the export sector will increase the countries exports earning and will affect the import bills

(ii) Decreasing import (import substitution through local industries and imposing high tariffs): Any country facing the problem of an adverse balance of payment will have to restrict import so as to reduce the peoples demand for import and thus cut down on high bills of import

(iii) Exchange control regulations: An introduction of import exchange regulation will aim at controlling the amount of foreign exchange that can be made available for a countries citizen for their transaction overseas

(iv) Borrowing: Loans may be taken by the country to finance mainly imports of capital, equipments and raw materials in other to increase production in the home industries for export.

(v) Devaluation: This is a situation whereby the value of a countries currency is reduced and made cheaper than other countries. By so doing, import materials will become costlier than locally made goods. There will therefore be an increase in the demand for export

(vi) Depletion of foreign reserves: Part of the countries good, reserves and securities may be sold in other to normalize the adverse balance of payments.

(vii) Acceptance of gift or technical or personal aids

(viii) Deflationary measure: A country may decide to reduce the quantity of money in circulation so that its citizen do not have much money to finance consumption of goods and services