WAEC Commerce 2019 Theory — Question 6

Model answer

(a) Balance of Payment deficit. (b) Measures to correct a balance of payment deficit: • Reducing imports of goods that can be produced locally: placing restrictions on goods that local firms can produce. • Promoting export-based firms: government can give loans and tax holidays to exporting firms so they can charge lower prices, making exports cheaper and increasing purchases. • Devaluation of local currency: reducing the value of the local currency, making imported goods more expensive and reducing demand for them. • Selling of property abroad: if property held abroad is sold, this leads to higher receipts for the country, helping correct the deficit. • Borrowing from abroad: taking loans from institutions like the IMF, resulting in increased international receipts to offset export payments. • Embargo: government can place an embargo on foreign goods, reducing the payment made for foreign goods.