This country’s adjustment programme since 2013 offers a textbook demonstration of an effective framework for managing the foreign exchange-constrained economy in the face of adverse circumstances. Because foreign exchange is crucial, economic policy makers check the balance of inflows and outflows every day, so that any pressure on foreign exchange may be detected immediately.
In May of 2013 we noticed a persistent decline in foreign exchange reserves, and we understood that total spending in the economy would have to be cut, to reduce the demand for imports in line with the available foreign inflows. The tool used to adjust spending was fiscal tightening. The first budget adjustment, in August 2013, proved insufficient; the reserves continued to fall.