Sustaining Trade and Exchange Rate Reform in Africa: Lessons for Macroeconomic Management

Sustaining Trade and Exchange Rate Reform in Africa: Lessons for Macroeconomic Management

Over the past two decades, most African countries have attempted to promote trade and exchange rate reform as part of broader programs of structural adjustment. Few countries have sustained the reforms. Many potentially beneficial policy changes have unraveled.

This paper discusses how trade and exchange rate reforms are indirectly undermined. These occur in several ways. Some policy reversals are intentional; some result from the inability of African governments to effectively manage the economic system.

The paper concludes with suggestions of institutional and policy-related modifications that can assist reform-mined governments sustain key policy changes once they have been made. These include:

  • focusing on (and, if necessary, publicising) the costs of policy reversal
  • highlighting the costs of not adjusting
  • emphasising confidence-building actions
  • giving prominence to specific changes within the broader strategic setting; and keep the reform agenda simple by stressing the basic features of reform

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