South African border post. Image credit

South African border post. Image credit

ZIMSEC O Level Commerce Notes: Methods used to correct an unfavourable Balance of Payment

Methods and ways of correcting an unfavourable balance of payments.

  • The government of Zimbabwe may use the following ways to correct its BOP if its unfavourable i.e. when a deficit occurs.
  • Reduce expenditure on foreign currency by:
  • reducing imports.
  • Negotiating debt cancellation with our creditors e.g. World Bank and the International Monetary Fund (IMF)
  • Increase inflow of foreign currency by:
  • increasing exports.
  • Attracting foreign investors ( Foreign Direct Investment)
  • Make imports more expensive by devaluing the local currency.
  • Make exports cheaper by subsidising them.
  • Reduce imports by rationing or reducing foreign currency allocation for importers.
  • Reduce the number of importers by controlling the issue of import licences.
  • Discourage domestic consumption of specific products by introducing excise duty and export more goods.
  • Discourage consumption of imported goods by charging high customs duty.
  • Limit quantities of goods to be imported through trade quotas.
  • Attract foreign buyers by participating in trade fairs and exhibition for example the International Trade Fair in Bulawayo.
  • Increase exports by giving tax incentives to exporters.
  • Assist exporters by establishing export promotion programmes and processing zones.

To learn more about the methods in which the government might control trade go to this page.

To access more topics go to the Commerce Notes page.