Foreign Exchange Restrictions Research Articles

A simple model of internal and external balance for resource‐rich developing countries

AbstractWe present a simple model of internal and external balance that incorporates key features of resource‐rich developing countries (RRDCs). The main result is that ‘government take’—the ratio of fiscal resource revenue to resource output—is a key determinant of the equilibrium real exchange rate (ERER) in these countries. Examining the case of Papua New Guinea, which has grappled with foreign exchange restrictions since 2015, we find that about half of the RER overvaluation estimated at 26% in 2019 would disappear if the current low level of government take was to be lifted to its long‐term average. The analysis has two key takeaways for RRDCs. First, changes in the government take require adjustments to the RER and fiscal policy to maintain internal and external balance. Second, economic adjustments to falls in the take are difficult; therefore, policies seeking to stabilise the take over time to promote macroeconomic stability are recommended.

Effects of Non-Tariff Barriers on Promotion of East African Community Integration: A Case of Magasins Généraux du Rwanda

Regional integration in East Africa has proven to strengthen investments within member nations. However, differing non-tariff barrier policies among East African Community (EAC) partner states have posed significant challenges to progress. This study assessed the effects of non-tariff barriers on the promotion of EAC integration, using Magasins Généraux du Rwanda (MAGERWA) as a case study. Specifically, the study evaluated the effects of technical barriers to trade, analysed the impact of import quotas, and scrutinised the effects of foreign exchange restrictions on EAC integration. The study was anchored in three theories: Liberal Intergovernmentalism Theory, Economic Integration Theories, and the Heckscher-Ohlin Theory. It used a descriptive research design with both quantitative and qualitative approaches. The target population consisted of 2,045 individuals. A sample size of 335 was determined using the Yamane formula and selected through both simple random and purposive sampling techniques. Data were collected using a questionnaire survey and analysed using SPSS version 26. Bivariate analysis, including P-values, was used to evaluate the relationship between independent and dependent categorical variables. Descriptive statistics such as mean and standard deviation, as well as single and multiple logistic regression models, were used to assess the strength of the relationships. A p-value < 0.05 and a 95% confidence interval were used for inference. Results were presented in frequency and cross-tabulation tables. The study found that technical barriers to trade had a statistically significant relationship with the promotion of EAC integration (r = 0.953, p<0.05). Similarly, import quotas showed a significant relationship with EAC integration (r = 0.954). Foreign exchange limitations also demonstrated a significant correlation with EAC integration, with a correlation coefficient of.966. The regression analysis showed a mean square of 199.267 and a residual mean square of 0.107, with an F-value of 1864.147 and a p-value of.000b. The researcher suggested that EAC member states should implement the planned goals of the community to promote free trade in the region, thereby enhancing economic integration.

АНАЛІЗ ЕФЕКТИВНОСТІ ВИКОРИСТАННЯ ІНСТРУМЕНТІВ ВАЛЮТНОЇ ПОЛІТИКИ В УКРАЇНІ В ПЕРІОДИ КРИЗ 2008–2009 ТА 2019–2020 РОКІВ

The article is devoted to the analysis, comparison and evaluation of the effectiveness of the foreign exchange policy instruments used during the crises of 2008-2009 and 2019-2020 in Ukraine. The main types of instruments of foreign exchange regulation and the priority areas of their application were defined. The authors took under consideration the key features of the construction of the socioeconomic model of Ukraine, the geopolitical situation, and the imposition of cyclical fluctuations during the considered periods. In the course of the study, the exchange rate fluctuations of the national currency against the US dollar were monitored to determine dynamics of the devaluation and revaluation processes within the given time frames. In order to detail the regulatory foreign exchange policy, a separate analysis of the use of NBU tools within the current and long-term strategy was carried out, the differences were identified and the consequences were outlined. The conducted research showed that during both crises the discount policy, namely the change in the discount rate, was most actively used. But the changes were somewhat divergent: more aggressive liberal measures taken to reduce the discount rate during the 2019-2020 crisis appeared to be more effective compared to the crisis of 2008-2009. This is evidenced by data on changes in GDP PPP, indicating the best positive dynamics when exiting the recession during the pandemic. However, in both cases, significant devaluation was observed. In order to determine the causes and consequences of the depreciation of the national currency in relation to the US dollar and other currencies, an analysis of the balance of payments accounts was carried out by individual articles. This made it possible to indicate significant differences in the nature of the origin of these crises. The instruments of motto policy were also used with varying degrees of activity and in the opposite direction. Foreign exchange interventions in 2008-2009, in contrast to the period of 2019-2020, were used very limitedly due to the rather rapid depletion of gold and foreign exchange reserves. Foreign exchange restrictions were strengthened in 2008-2009, and liberalized in 2019-2020. As a result, it allowed to revive investment flows and improve the business climate in the country. It is also noted that against the background of general devaluation during both crises, a period of revaluation of the national currency was also observed in 2019. The analysis showed that in that case it was rather a negative phenomenon, which led to significant losses in the revenue part of the budget due to a decrease in revenues from customs payments, resulted from the inconsistent actions of the NBU and relevant ministries. Other elements of foreign exchange policy were almost not used: the degree of currency convertibility and the exchange rate regime did not change (with the exception of a short period of introduction of the exchange rate band). The same can be said about the instruments of the long-term foreign exchange policy: the order of international settlements was slightly adjusted, but not significantly; the regime of exchange rates and parities remained unchanged; the use of gold and reserve currencies was combined with the diversification of foreign exchange reserves and was mainly related to foreign exchange interventions and the fulfillment of external debt obligations. The conducted analysis allowed to identify the main directions of the foreign exchange policy of Ukraine regarding the stabilization of the economy and the achievement of sustainable economic growth. To solve this problem, it is advisable to gradually introduce foreign exchange liberalization, introduce new reforms and state projects that might improve the investment climate. It is also appropriate to de-dollarize the debts of enterprises through incentives for lending in the national currency. In the long term, it is appropriate to strengthen financial and capital markets to ensure the stability of economic growth.

Dynamics of the poultry market in Ghana

This paper examines the dynamics of the poultry market in Ghana using secondary data and a field study in four regions including Greater Accra region, Western region, Ashanti region, and Northern region. Secondary data on prices, per capita consumption, import, and export quantities was obtained from the Food and Agriculture Organization (FAO) and the Ministry of Food and Agriculture (MoFA). Primary data on shopping malls, supermarkets, cold stores, and open markets as well as on imported and local chicken meat prices and brands was also obtained using surveys and focus group discussions. The study employs trend and content analyses to highlight specific imported products, their origins, drivers, and the potential of domestic poultry as a substitute for imported chicken meat. The paper confirms that Ghana imports about 80% of its poultry meat, mostly in the form of branded cut parts (thighs, wings, legs, back, and offal) from high-income countries including Belgium, the US, Brazil, Poland, and the Netherlands. Despite a 35% increase in tariffs, imported poultry meat tends to be 27-30% cheaper than locally produced chicken. The findings further show that although there is some preference for domestic poultry meat, this does not translate into purchase decisions, as people prefer more convenient and ready-to-use products. The paper recommends the prioritization of policies to boost local production through investments in processing (cut parts), branded packaging, and marketing facilities such as cold vans. Furthermore, policies to reduce chicken meat import volumes may be focused on other non-tariff measures such as licenses, allotments, trade embargoes, foreign exchange restrictions, and import depositories.

Redistributive Impact of GST Tax Reform: Pakistan, 1990-2001

Pakistan has undergone a significant change in tax structure over the last fifteen years. However, this change is not apparent on the surface, as there has not been much change in the tax to GDP ratio over the last fifteen years. But if we look beyond the surface we can see changes, for example in (1990-91), indirect taxes contributed 82 percent of total tax revenue with Customs, Excise and Sales tax each contributing around 55, 28 and 18 percent respectively, while in (2001-02), indirect tax share within the total tax revenue fell slightly to 68 percent with Customs, Excises and Sales tax each now contributing around 18, 18 and 64 percent respectively. Thus, it may not be wrong to say that there has been a significant change in the tax mix in the span of less than ten years and this development is important from the perspective of efficiency, effectiveness and equity with which revenues have and will be raised. Although, Value Added Tax (VAT) is likely to be more efficient in raising revenue than both the ordinary Sales Tax and Trade Taxes that it has replaced see e.g. [Nellor (1987); Liam Ebrill (2001)], the same cannot be said as far as the fairness issue is concerned. This in no way implies that the trade taxes replaced by VAT were more fair. However in most developing countries they operate with strict import licensing schemes, binding quotas and foreign exchange restrictions that make them more a kin to lump sum tax. Therefore in most cases they have no flow through effect to the consumers [for example see Clarete (1986); Shah (1991)]. But in contrast to this VAT being a consumption tax has the capacity to directly affect each and every household. Thus equity becomes much more of a real concern and this concern is heightened given that governments of most of the developing countries lack the capacity to carry out significant redistribution.

The Root of Hyperinflation in Venezuela: Statism, Chavismo, and Dictatorship

Venezuela, endowed with abundant oil resources, was one of the wealthiest countries in Latin America, with a promising future. However, Venezuela’s economic condition has dramatically deteriorated in recent years, with the country experiencing hyperinflation and a major recession in 2016. The popular view is that Venezuela suffers from the “Dutch disease,” in which a government develops an unsustainable reliance on natural resource exports at the expense of other sectors, making the economies increasingly susceptible to volatile global oil prices and capital flights. This study compares economic data from oil-dependent countries around the world and reveals that the “Dutch disease” theory can only explain Venezuela’s economic downturn, not its deep recession and hyperinflation. This essay then delves into three sociopolitical causes of Venezuela’s poverty crisis: aggressive Chavismo statist policies that overextended the Venezuelan economy and made it vulnerable to international oil prices, a strong presence of illegal market sectors that disrupted market equilibrium, and Venezuela’s personal dictatorship under the Chávez-Maduro administration. Despite the preceding three sociopolitical factors contributing to Venezuela’s hyperinflation, the country’s economic outlook is positive owing to a vacancy in the global oil market as a result of the 2022 Ukrainian summer counteroffensive. This paper proposes that the key to successfully resolving the crisis is promoting private investment and tackling the resource curse, both of which require a robust democracy with an independent press and judiciary. Venezuela may seek international assistance to implement political reforms, abolish foreign exchange restrictions, and move toward economic liberalization.

ПОСИЛЕННЯ ВАЛЮТНОГО РЕГУЛЮВАННЯ В УКРАЇНІ В УМОВАХ ЕСКАЛАЦІЇ ВОЄННИХ ДІЙ

Обґрунтовано актуальність використання потенціалу валютно-курсового регулювання в Україні в умовах війни і повоєнної економічної відбудови. На прикладі заходів валютного регулювання НБУ в умовах війни підтверджено дієвість валютних обмежень у частині тамування панічних і спекулятивних настроїв, утримання національного капіталу від втечі й загальної стабілізації обмінного курсу національної валюти. Відзначено, що ефективність заходів із стабілізації валютного курсу могла б бути вищою, якби вони реалізовувалися в рамках дієвої системи валютного регулювання. На підставі даних платіжного балансу України показано джерела девальваційного тиску у вигляді торговельних кредитів за кордон, імпорту послуг, знятті готівкової валюти з гривневих карткових рахунків. Окреслено ознаки порушення структури платіжного балансу через зменшення доходів від експорту продукції та грошових переказів при їх заміщенні міжнародною фінансовою допомогою. Виявлені загрози підтверджують необхідність розбудови вітчизняної системи валютно-курсового регулювання і валютного нагляду для запобігання виведенню національного капіталу, обмеження спекулятивного і панічного попиту на іноземну валюту й збільшення пропозиції на валютному ринку. Зазначено, що посилення заходів із стабілізації національної валюти цілком відповідає актуальним поглядам науковців, рекомендаціям міжнародних фінансових інституцій і вимогам євроінтеграції, тим більше, зважаючи на обставини війни. Концептуалізовано першочергові напрями розбудови системи валютно-курсового регулювання, що включають офіційне визнання необхідності такої системи і розширення функціоналу системи валютного нагляду, акцент на обмеженні спекулятивного й панічного попиту, боротьбу з напівлегальними шляхами виведення капіталу за кордон. Ефективний інструментарій такого регулювання повинен включати широкий спектр заходів, у тому числі з використанням інструментів макропруденційної політики, контролю за потоками капіталу і валютних інтервенцій на довгостроковій основі, оперативного використання адміністративних вимог для закриття виявлених шляхів уникнення встановлених обмежень.

Porter’s generic strategies for competitive advantage: how they work in selected asian economies

Porter’s generic strategies are important for organizations to gain a competitive edge in their respective market. This is especially true for companies in Asia, the world’s largest continental economy in terms of gross domestic product (GDP) which is also characterized by foreign exchange restrictions, anti-trust laws, and price wars. This paper focuses on the literature on Porter’s generic strategies within the contexts of the three biggest Asian countries (China, Japan, and India). Our review highlights the generic strategies pursued by multinationals in Asia and factors to consider when executing strategic plans in business expansion to the region.

An Investigation Into the Effects of Central Bank Regulation on Exchange Rate Case Study of Zimbabwe From 1980–2019

Foreign exchange interventions as a possible tool needs to be assessed taking into account both the design and implementation of monetary policy for this reason, the forms of foreign exchange intervention and their effectiveness in achieving exchange rate ,since there were limited foreign exchange restrictions and less direct government controls in the foreign exchange market before (Rossini et al (2013). During the period 1991 to July 1994, a two-tier exchange rate system was used one quoted by the Reserve Bank of Zimbabwe (RBZ) and the other one determined in by inter-bank market. Following the demise of the Auction System, the Reserve Bank of Zimbabwe announced the Tradable Foreign Currency Balances System (TFCBS) on 24 October 2005.Initially foreign currency was only accessed from banks and was later decentralized resulting in the licensing of several Bureau de Changes across the country in 2002 to 2013 era. There were several policy revisions, reversals and even de-licensing bureau de change.

Does the Liberalization of Trade Advance Gender Equality in Schooling and Health?

This paper assesses the empirical relationship between the liberalization of international trade and the economic status of women. Although historically globalization is not generally linked to the advancement of women, several recent country studies find export led growth in middle and low income countries is associated with improvements in women’s employment opportunities. Does intercountry empirical evidence confirm this association across a wider range of countries, and suggest the mechanisms by which it operates? Measures of wages for men and women are an unreliable basis for study of gender inequality in many low income countries, and thus schooling and health are analyzed here as indicators of productivity and welfare and gender gaps. For a sample of 70 countries observed at five year intervals from 1965 to 1980, tariff, quota, and foreign exchange restrictions are found to be inversely associated with trade, and with the levels of education and health, especially for women. Natural resource exports, although providing foreign exchange for imports, appear to reduce investments in schooling and health, and delay the equalization of these human capital investments between men and women. Liberalization of trade policy is consequently linked in the cross section to increased trade, to greater accumulation of human capital, and to increased gender equality.

ETAPY NA DRODZE DO CAŁKOWITEJ WYMIENIALNOŚCI LIRA WŁOSKIEGO W OKRESIE 1945-1958

DOI: 10.19251/rtnp/2020.12(7) The article discusses the successive stages involved in the Italian lira obtaining full convertibility according to the standards of the International Monetary Fund. The fulfillment of the main demands of the IMF and the formation of the monetary system functioning in the postwar period were accomplishedin 1958 with the transition of twelve Western European countries (including Italy) to the external convertibility of their individual currencies. This happenedas a result of the abolition of foreign exchange restrictions that were introduced earlier. It is possible to speak of the emergence of an international system of gold and currency under these conditions. All these changes made the Italian lira a “hard currency” and gave it the status of an international currency.For the first time since the end of the war on June 30, 1960 the official exchange rate at the IMF was 0.001421 grams of pure gold. This exchange rateremained at this level (with only minor deviations) for the next nine years. The introduced system of convertibility of the lira contributed to its strengtheningand stabilization as a currency in which balance of payments operations of many countries were conducted.

Exchange Arrangements Entering the Twenty-First Century: Which Anchor will Hold?*

Abstract This article provides a comprehensive history of anchor or reference currencies, exchange rate arrangements, and a new measure of foreign exchange restrictions for 194 countries and territories over 1946–2016. We find that the often cited post–Bretton Woods transition from fixed to flexible arrangements is overstated; regimes with limited flexibility remain in the majority. Even if central bankers’ communications jargon has evolved considerably in recent decades, it is apparent that many still place a large implicit weight on the exchange rate. The U.S. dollar scores as the world's dominant anchor currency by a very large margin. By some metrics, its use is far wider today than 70 years ago. In contrast, the global role of the euro appears to have stalled. We argue that in addition to the usual safe assets story, the record accumulation of reserves since 2002 may also have to do with many countries’ desire to stabilize exchange rates in an environment of markedly reduced exchange rate restrictions or, more broadly, capital controls: an important amendment to the conventional portrayal of the macroeconomic trilemma.

Interpretation and Application of Investment Measures in Practice of International Investment Arbitration

INTRODUCTION. Developing States are interested in both the inflow of foreign investment and its efficient use in their national economies. In the furtherance of this objective, host States set in their national legislation trade-related investment measures, referred to as “performance requirements” (requirements to achieve certain national economically useful results). The interests of foreign investors and host States in the matter of measures falling within the concept of “performance requirements” mostly diverge, since these measures create for foreign investors competitive restrictions related to the use of their investments. In legal science and practice there are known trade-related investment measures, such as export requirements, foreign exchange restrictions, local content requirements and others. The possibility for foreign investors to invest without performing trade-related investment measures was one of the main problems of transnational investment. The TRIMs agreement and Art. 1106 of NAFTA are devoted to the sole subject of regulation – “performance requirements”. The idea of limiting these measures was simultaneously discussed in the NAFTA negotiations and within the Uruguay round: the elaborated provisions are similar in some aspects, but have their specific characteristics. The article deals with the rules of both agreements in light of dispute settlement practice. The conclusions of the arbitrators are analyzed in chronological order, which helps to trace the evolution of the single concept in two distinct systems of WTO and NAFTA rules. The article demonstrates the common points and differences in the interpretation of the concerned provisions norms, with consideration for the context and objectives of the agreements. MATERIALS AND METHODS. The materials used in the article include the works of Russian and foreign scholars in the field of international economic law and WTO law, international legal documents adopted within the WTO and NAFTA, as well as materials of judicial and arbitration practice of investment disputes. The research was done on the basis of general and specific scientific methods of cognition (dialectical method, analysis and synthesis, deduction and induction, comparative legal and historical-legal methods). RESEARCH RESULTS. The analysis revealed that trade-related investment measures are part of the “performance requirements” listed in Art. 1106 of NAFTA, which developed countries managed to defend in negotiations with developing countries during the drafting of the TRIMs agreement. Despite the integrity of the concept of “investment requirements”, there is an evident difference in the scope of covered measures, as well as the conceptual difference between the notions of “trims” and “performance requirements”, due to the specifics of the WTO and NAFTA. Nevertheless, in both cases, common qualification criteria of prohibited measures have been developed independently from each other in the practice of investment disputes settlement in order to address similar issues of interpretation. DISCUSSION AND CONCLUSIONS. On the ground of the analysis of arbitration practice in the TRIMs and Art. 1106 of NAFTA, the article gives reasons for the conclusion of the parallel development of the concepts of “trade-related investment measures” and “performance requirements”.

Private Enforcement of International Monetary Law: Arbitration of Investment Treaty Claims Relating to Foreign Exchange Restrictions

International economic activity depends on the cross-border flows that characterize economic globalization—principally of goods, services, capital and labour. These flows all have in common that they involve some element of transnational transfers of funds. The international regulation of trade, investments and other economic activities is therefore inextricably linked to the regulation on the international plane of the transfer and currency conversion such funds, i.e. on international monetary law. A closer look at the political reality of international monetary affairs offers scant reason to presume that the existing liberal paradigm of free capital mobility and market-responsive exchange rate flexibility is beyond challenge or a potential reversal. Yet, rules exist on the international plane to ensure that exchange rates and capital flows remain free from restrictions, manipulation and distortion. In the Post-War international economic order and global institutional set-up, the task of enforcing the rules of international monetary law fell upon the International Monetary Fund. This role was enshrined in GATT 1947 and remains essentially intact. Nonetheless, in recent years, the efforts of the Fund to enforce such rules has not been sufficient to quell allegations against States of exchange-rate misalignment and currency manipulation. This paper, which builds on the author’s ongoing PhD research, looks at private enforcement of international monetary law and asks whether investment arbitration of exchange-rate disputes may offer an alternative enforcement mechanism that might result in positive externalities, benefitting all investors, traders and other non-disputing third parties, and thereby may help restoring trust in trade and investment. The paper seeks to confirm the availability, practicality and functionality of arbitral process to resolve disputes relating to currency convertibility. The paper first explores whether investment disputes relating to exchange rate restrictions are arbitrable for reasons of public policy and the political sensitivity of the interests concerned and, if so, whether and under what conditions any resulting arbitral awards nonetheless may be refused recognition and enforcement. In a second step, the enquiry interprets the scope of application and manner of application of substantive international investment law to determine whether such disputes fall within the scope of investment treaty protections and whether such protections should be restrictively applied to such disputes.

After Papua New Guinea's Resource Boom: Is the Kina Overvalued?

AbstractPapua New Guinea's (PNG) resource boom has come to an end. Theory suggests that the real exchange rate (RER) should subsequently depreciate in order to restore internal and external balance. In practice, however, the imposition of foreign exchange controls has led to a large backlog in foreign currency orders suggesting that the RER is significantly overvalued. The purpose of this paper is to inform the ongoing policy debate surrounding this issue by estimating the extent to which PNG's RER is currently misaligned. Our results suggest that the kina should depreciate by about 20% to close the gap between the actual and equilibrium value of the RER. Otherwise PNG is likely to pay high economic costs as real overvaluation sustained through foreign exchange restrictions led to resource misallocation, lower economic growth, black markets, and ultimately a balance of payments crisis in many other developing countries in the past.

La relación entre el tipo de cambio oficial y el tipo de cambio negro en América Latina

The recent implementation of foreign exchange restrictions in Argentina and Venezuela leads us to reconsider the history of foreign exchange controls in Latin-America. The aim of this paper is to analyse the effectiveness of these controls in preventing sudden devaluations in the official rate. The analysis uses a simple portfolio model and an econometric test is proposed that uses panel cointegration techniques to explore the relationship between official and black market rates. It was found that the official and the black market rates are cointegrated, and that mainly the official exchange rate is usually adjusted when there is a disequilibrium. This suggests that foreign exchange controls in Latin-America were not an effective tool to avoid large and abrupt devaluations.

Theoretical foundations, condition and practice of development of payment systems in Ukraine

In modern conditions payment systems have an important role in the economy, as they must provide effective economic means of payments. Accordingly, the development of payment systems in Ukraine appears as a relevant theoretical and practical problem.In the article the theoretical basis and features of payment systems in Ukraine were researched. Preconditions of systemically important payment systems development been analyzed, which are performed by the key principles of their organization and functioning. Realization of principles of systemically important payment systems in Ukraine was investigated. The key principles of operation and functioning and their implementation in retail payment systems were determining, such as providing competitive services, security payments from outside interference, territorial and temporal availability, profitability of participation in the payment system, consumer protection, instant calculation of account balance, instant currency conversion and minimize currency risk.Recommendations for improving the procedures for conversion of currencies in the international card payment systems were provided in order to reduce currency risks for end-users and issuing banks, such as introducing restrictions on the period of submission for payment of international trade, as well prohibit use of trade-service enterprises for currency conversion their own exchange rates. The necessity of legislative regulation of the size of interchange fee in card payment systems to create more favorable conditions for the spread of retail electronic payment was determined as well as removal of legal restrictions on the issuance and use of electronic money and foreign exchange restrictions in order to create the conditions for international payment systems based on electronic money to enter the Ukrainian payment market.

After Papua New Guinea's Resource Boom: Is the Kina Overvalued?

Papua New Guinea’s (PNG) resource boom has come to an end. Theory suggests that the real exchange rate (RER) should subsequently depreciate in order to restore internal and external balance. In practice, however, the imposition of foreign exchange controls has led to a large backlog in foreign currency orders suggesting that the RER is significantly overvalued. The purpose of this paper is to inform the ongoing policy debate surrounding this issue by estimating the extent to which PNG’s RER is currently misaligned. Our results suggest that the kina should depreciate by about 20% to close the gap between the actual and equilibrium value of the RER. Otherwise PNG is likely to pay high economic costs as real overvaluation sustained through foreign exchange restrictions led to resource misallocation, lower economic growth, black markets, and ultimately a balance of payments crisis in many other developing countries in the past.

ЮЖНОАФРИКАНСКИЙ РАНД: НА ПУТИ К СТАТУСУ РЕГИОНАЛЬНОЙ ВАЛЮТЫ

The relatedness of the article is determined by the developments in the world system of currencies occurred in 2014–2016, i.e. the establishment of the BRICS Development Bank and the inclusion of Chinese Yuan into the SDR currency basket. Author explores the potential of South African Rand to become a regional currency and, eventually, an international one thanks to the cooperation within the BRICS in the spheres of the international trade and foreign exchange. The expertise of South African Republic in gradual liberalization of foreign exchange restrictions and internationalization of national currency Rand is laid out. Direct trade in South African Rands is regarded as a provisional stage for its wider use in regional trade. The author attempts to calculate the potential benefits of direct trade in Rands in the Southern region of Africa. The potential amount of Rands that could be traded on the foreign exchanges of South Africa and Botswana (as a result of direct exports and imports between them) is a major indicator for the South African government while taking decision concerning the scope of the Rand’s internationalization under the existent gradualist policy. The author considers a hypothetical scenario according to which direct trade in goods and services and cross-border trade in Rands between South Africa and Botswana can trigger the process of the latter’s integration into the Southern African United Currency Zone. This can become an important factor of Rand’s strengthening as a regional currency and, eventually, its transformation into an international one. In conclusion, the author makes forecasts as to further developments in Botswana’s foreign trade with China in case of its inclusion into the Rand zone.&nbsp

Argentina: 2016 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Argentina

An inherited legacy of imbalances. Upon taking office in December last year, Argentina’s new government faced pervasive macroeconomic imbalances, microeconomic distortions, and a weakened institutional framework. These encompassed unsustainably high consumption levels, historically low levels of investment, and large fiscal deficits financed by money creation, which led to high inflation. Distortions at the micro level included an extensive network of administrative controls (for example, trade barriers, foreign exchange restrictions, and price controls) and a business environment that eroded competitiveness and undermined medium-term growth. There was also an important weakening of the institutional framework for economic policymaking, perhaps most evident in the loss of credibility of the national statistics agency.