The Trade Imperative

Economists from very different backgrounds often counsel against a fast growth of imports—and it is certainly true that the balance of payments constraint all too easily derails growth episodes. But the level of output is more important than an obsession with the obsessive pursuit of macroeconomic balance; macroeconomic policy has to serve productive goals rather than vice versa; and policy needs to enable rapid import growth to raise the overall level of output. African countries urgently need to push for rapid export expansion. This chapter argues against International Monetary Fund (IMF) balance of payments approaches. It also argues that the evidence undermines the export pessimism common among many structuralist economists. There is compelling evidence suggesting the need for competitive (undervalued) exchange rates; these are more effective when combined with targeted policies encouraging investment in specific activities that satisfy the criteria we set out here and in other chapters.