Impact of the international monetary situation on the trade of African countries : measure which African central banks might take to avoid or lessen the harmful effects of the situation

UNITED NATIONS

CONOMIC AND SOCIAL COUNCIL

Diatr.

LIMITED

E/CN.14/AMA/56

18 November 1974 Original: ENGLISH

ECONOMIC COMMISSION FCR AHtICA

ASSOCIATION OP AFRICAN CENTRAL BANKS Seooad Seminar of the Association

of Afrioan Central Banks Addis Ababa, 5-16 August 1974

IMPACT OP THE INTERNATIONAL MONETARY SITUATION ON THE TRADE OP AFRICAN COUNTRIES. MEASURES WHICH AFRICAN CENTRAL BANKS 'WOEF TAKE TO AVOID

• OR LESSUT THE HAHMPUt EBtfECTS OP THE SITUATION

(Paper presented by* la Banque Centrale dee Etata

: de ^'Afrlcrue de 1'Quest)

The system of fixed exchange rates, instituted by the agreements signed at Bretton Woods in 1944, came to an end in August 1971 following the

decision of the United States Government to suspend temporarily the gold convertibility of dollar reserves held by foreign central banks• ■

Since that decision was taken, the international monetary so*** has been marked, in an initial stage, by fre<juent parity changes and subsequently by a degree of generalized floating of the currencies of the Industrialised countries. Afrioan countries, whose intervention1 currencies were mostly, until recently, European currencies, were obliged to follow fluctuations

in exchange rates on international markets and take decisions as to the

value, of their currencies.

The aim of the present study is to analyze the development of the international monetary situation since August 1971andits impact on the trade of Afrioan oountries. An attempt is also made io suggest' measures to neutralize the harmful effects of the monetary situation on the

economies of Afrioan countries. However, the study will not deal with the impact of th© situation on the development t>f African countries, since that subject is better taken up for the'group of developing countries as a

whole*

I. Development of the international monetary situation since August 1971

Following intense pressure on the dollar, the United States Government

decided on 15 August 1971 to suspend temporarily the gold convertibility

of dollar reserves held by foreign central banks* The decision was accompanied by various measures designed to restrict imports into the United States

and to improve the country's baianoe^-of-payments position* "

Page 2

Several central banks then announced that they would no longer respect the 1 per cent margins of fluctuation around parity for their currencies < as required under the Bretton Woods agreements and, before the end of August 1971, the currencies of the major industrialized countries began to float in various circumstances; separately in the case of the pound sterling, jointly in the case of certain Common Market countries and under a two—tier arrangement in the case of the French franc. At the same time certain developing countries decided

*to allow their currencies to float.

In December 1971 the Smithsonian Agreement fixed new parities

among the main Western currencies and widened the margins of fluctuation around parity from 1 per cent to 2.25 per cent. The official price of gold was raised from &35 an ounce to *38, an increase of 8.6 per cent.

The average rate of devaluation of the dollar compared with the former parities for the major curjteneies was approximately 12»5 per cent*

The most substantial revaluations' were those of the Japanese yen

(16.88 per ocat) and the Federal German mark (13*56 p«r cent).

At the beginning of 1972, the developing countries, which had not participated in the Smithsonian Agreement/"announced"to the International Monetary Fund the new parities of their currencies and the new margins of fluctuation for those which had dedided to widen them. Ip. Sfaroh 1972, the Common Market countries announced their intention to lin&t fluctuations

between their currencies to 2.25 per cent before 1 July 1972 at the

latest. Central banks were obliged to intervene more and more frequently during the months whioh followed in order to maintain the Smithsonian parities and the narrower margins between the Common Market currencies.

Despite these interventions, and further changes of parities in the case of seme currencies, as well as renewed floating for others> exchange markets did not settle, and the dollar was devalued in February 1973- This second devaluation of the dollar brought the official prioe of gold to #42 an ounce- Japan, Italy, the United Kingdoms Canada and Switzerland allowed their cx^rrencies to float, while the currencies of the other

principal industrialized countries maintained their parity against gold}

amounted to a collective revaluation of 10 per cent against the United : States dollar,

A few weeks later; pressure on the exchange markets forced the Common Market countries to allow their currencies to float jointly against the dollar within the previously agreed margin of 2.25 P®r oent, with the exoeption of the pound sterling, the Irish pound and the Italian lira, which continued .to float separately* In order to allow the Federal

German-mark to remain within the narrower margin (the flnake), it was

revalued by 5 per oent. The mark was to be revalued again, by 5*5 P®r

cent, at the end of June. "

The deterioration of the dollar's position in the exchange markets was to become more pronounced during the summer* ""' '

Page 3

With the tripling of the prioe of crude petroleum in October, *fchis trend was reversod during the autumn, with the result that, by the end of the

year, the dollar stood above the Smithsonian parities in respect of most of the currencies which had appreciated during the year. ;

All these developments led to many international meetings, some of which were also devoted to the reform of the international moneijary

syBtem. ' . - *

The progress of the exohange rates for the currencies of ttfe major trading partners of African countries during this period is summarised

in the following table* ■ ;

The table shows that all the currencies shown, with the exception of the Brazilian cruzeiro, rose against the dollar in 197.1; the largest rises were those of the Japanese yen, the Belgian franc, the Dutch guilder and the Federal German mark. The value of the French franc and the

pound sterling rose by only about 5 per cent.

During 1972, the performance of the various currencies was more varied, as can be seen by the mixture of rises and depreciation, probably caused by the intervention of central banks. However, the upward or downward fluctuations were distinctly smaller-

It was during the first six months of 1973 that the depreciation of the dollar accelerated on the principal exchange markets* It fell from DM 3-2 during the last quarter of 1972 to DM 2.4 during the second quarter of 1973s this represented.;a rise in the'markka value of about 25 per oent<, The Belgian franc appreciated to the same extent. In the case of the French franc and the Dutch guilder there was a rise of

about 20 per cent; the figures for ^he Japanese yen and the pound sterling were 12 and 10 per cent respectively-

The rates for the principal currencies quoted in table 1t which had changed very little against the dollar between the second and thj.rd quarters

of 1973, all registered a fall during the third quarter as a result of

the rise in the price of petroleum,. The rise in the value of th& dollar at this stage thus partially cancelled out the increases in value ot the curren cies of Africa fs main trading partners during the first half of the year.

The rise in the value of -the Federal German mark between the end of 1972 and the 6nd of 1973 amounted to only about 16 per cent, while the other currencies appreciated generally by less than 10 per cent over the

same period.

H» Decisions taken by African

African Governments took various decision* concerning their exchange rates after the onset of the monetary crisis in August 1971.

$3

Table1sTrendsinexchangeratesforselectedcurrencies,1971-1974 Belgium(franc) Brazil(cruzeiro) Canada(dollar) Fed©Rep.of Germany(mark) France(franc): Italy(lira) Japan(yen) Netherlands(gluider) Portugal(escudo) Spain(peseta) Sweden(krona) Switzerland(franc) UnitedKingdom(pound)

II 49-76 5-285 ■■1.0234 3.497 5.515 623-55 357-4 3-565 28.65 69-70. 5.165 4.097 2.4197

197 III

1 IV Currency .47.02 5.505 1,0091 3-318 5-530 612.00 334-2 3.372 27.66 68.67 5.035 3.950 2.4855

44-76 5-635

1 I.

97 II equivalentofft 43 5- 1.00220, 3.'268 5-224 594.00 314.8 3.254 27.56 66.02 4.865 3,915

3i ;5< 582, 304« 3. 27- 64. 4- 3. 2.55222, Source:IMF.Internationalfinancialstatistics

.96 .845 -9969 ;168 .028: -50! .2; ■194

ii5

.70 .782 .840 ,6158

43.84 5-915 0.985: 3.156 5.002 580.75 301.1 3.173 27-16 63.65 4.718 3-774 23444t

2 III

311.00^/

44.16 6.025 J0.9834 3-202_ 5.012 581.88 30T,1 3-236 27.12 63-59 4.750 3.801 I2o4203

IV 44^6 6.215 0.9956 3-202 5.125 582.50 302.0- 3.226 27-00 63-57 4.748 3.774 2-3481

I 40.80 6.030 0.9990 2.838 4-541 582.50 265-8 2.944 25.44 58*38 4.500 3.237 2.477?

197 II 36.85 6.100 O.9984 2.425 4-105 584.10: 265.3j 2.620 23-06 58.12 4.100 2-960 2,3820

3 III 36 6, 2, 4. >64. 16<>, 2< 23. 56. 4- 3. 2B*9Q .160 .0058 .420 ,250 ,05 ►7 •535 ■55 .86 .215 ,022 .4135

41.32 6.220 0.995* 2.703 4.708 607.92 280.0 2.824 25.96 56.95 4-590 3*244 2e3235

B

19*74 I 38-95 6-455 I0.9724 2.523 4.764 622.2S 276.0 2.685 24.76 59.23 4.410 3.000 :2*33<fc \]Exceptinthecaseofthepoundsterling,wherethedollarequivalentof£1.00isgiven.TfcerateBindicated areaveragefiguresforeach"three-monthlyperiod.-

^

Page 5

The Franc zone countries -..at that time oompviting the.State? ■ ;

members of the Banoue Central* d6B state de 1'Afrimie delateDahomey, Ivory Coast, Mauritania, Niger, Senegal, Togo'and. Upper Volta), the

States members of the Banmie des Etats de l'Afrique Central? (Cameroon, Central African Republic, Chad, Congo and Gabon), Madagascar and Mali - maintained fixed parities between their currencies and the French frano.

Consequently, the exchange rates of these currencies followed the

fluctuations of the French franc on the exchange markets. It should be noted that, because of monetary unions between some of these countries

and the fixed relationship of their currencies to the French franc, ^ their parities remained unchanged as between one another throughout the period of monetary crisis*

The countries in the sterling area did not all ^llow the parity + changes and fluctuations experienced % the pound. On 15 October 197T, the States members of the East African Community (Kenya, Tanzania and Uganda;

decided that the United States dollar would replace the pound sterling as the link currency for their shillings, and they followed the two

dollar devaluations. Two months later, Zambia also moved to the dollar as the currency by which the parity of the Zambian kwacha would be

determined; nevertheless, it decided not to follow the second devaluation

of the dollar. Nigeria, which had not yet changed its intervention _

currency, devalued with the dollar.in February 1973- Ghana^on the other hand, which had devalued by 48 per cent in December 1971, did not follow

the second dollar devaluation* '..''.

The other sterling area countries continued to fix the parity of their currencies on the basis of the pound, and to use it as their intervention

currency- . ,

Some African countries, which used the currencies of other countries (the South African rand in Botswana, Lesotho and Swaziland; the Portuguese

esoudo in the Portuguese Territories and the United States dollar in

Liberia) were obliged to play a totally jussive role in the monetary

crisis. Others, particularly in North Africa, made no ohange in the

official parities of their currencies reported to the International

Monetary Fund, -and their central banks intervened in order to fix daily

rates on the basis of the rates of their principal European partners.

The Sudan and Zaire followed the two devaluations of .the United States

dollar. ..

Thus* in general, African countries decided during the monetary crisis to fix the parities of their currencies in relation to European currencies, which mostly rose against the.dollar. The rise in value of African

currencies was, however, limited as the choice of intervention or link

currencies was usually the French franc or the pound sterling. Furthermore,

several countries unpegged. their currencies from the pound sterling in .*.

favour of the dollar- ,

E/CN.I4/AMA/56

Rage 6

It is clear that effective rates of appreciation or depreciation have not teen uniform, even for countries within monetary unions, because the geographical distribution of--for-eign trade Jvarieg, greatly from

one African country to another* At all events, the rates are not substantially different from the flucttu.tio.n rates observed for the

major pegging currencies,

III. Theoretical considerations ■ -.■_■*-

Arguments as to the. advantages and disadvantages of devaluation or revaluation of currenciess although well known, have often been the

subject of controversy among economists-

It would seem to..be useful in this section to recall the main theoretical considerations concerning parity changes, particularly as regards the effects of devaluation on txede, the balance-of^payments

and the eponomy of developing countries i/c ■■

The previous section contained a survey of decisions taken by

African countries during the monetary crisis. There were many countries which kept their currencies:pegged to a European currency because of the geographical concentration of their external trade and certain special links. The pegging resulted in a significant appreciation of the currencies concerned because of the development of the exchange rates of the intervention Currencies on international markets, but not

because of a governmental decision to revalue. Other-countries-decided . at the outset to devalue at the same time as the United States dollar*

Since the instruments of economic and financial policy available to them are generally inadequatet the developing oountries have often had recourse to a devaluation of their currencies in order to attain the

objectives they have set themselves. These objectives include improvement of the trade balance and the terms of trade v industrialization, the

growth of incomes and the improvement of their distribution among the

various strata of the population.

Because of the importance of external trade in their economies and of agricultural products in their exports, parity changes can be an

effective instrument of economic policy for African countries* Devaluation, which is equivalent *o the adoption of a new price structure between the domestic and external markets, can in certain conditions make possible

improved allocation of resources^

The expansion of exports and the improvement of the trade balance and the terms of trade, effects expected from devaluation, encounter, however, obstacles inherent in the structures' of developing countries.

For a more detailed presentation, see Richard N. Cooper, "An Analysis of Currency Devaluation in Developing Countries"7 in Connally and Swobodar edsM International Trade and Money (London: George Allen

and Unwinv 1963), pp.167-196.

e/cn.h/ama/56

Page 7

Exports, are mostly of agrioultural products,, for .which supply elasticity is very* limited and the price elasticity of demand in the consumer countries is also siuall. These problems are also found in the case of imports:

-the prioe^ elasticity of demand in African countries is very low, sinoe . imports comprise for the most part food products, raw materials, semi

manufactures and capital goodsu ■ ■ *

■ Nevertheless, devaluation can encourage exports of semi-manufactures and manufactures, and can promote a degree of industrialisation in so . fer ,es industry use first and foremost local raw materials and manpower

and external markets are prepared to absorb their output, African countries are particularly well placed in this field because of the nature of their industries (which are mostly processing industries) and the preferential agreements which some of them have conceded with the Common Market countries. '

As.for the effects of devaluation on other items on the balance-of- paymentBj price variations .generally have little influence on the way they

■* d|evoipp.?, However, since the services account is in deficit in many African countries, a/devaluation tends to aggravate the imbalance.

Outflows of capital also tend to inoreaee, even with a strict exchange conti-o! 3ystem? while receipts become steadily less regular- Counterpart contributions to official capital may, oh the other hand, be revalued .^ if;. the assistant *^ ~*:?:?eBsed in currency, as is the case with

assistants from the European Development' Pond.' • ' *'":

The .redistribution: of ■ income among the various population strata' may be facilitated by a.devaluation; this has already occurred in several developing oountries, where devaluation has made it possible to raise

^prices paid to producers substantially and to inake Eon^essential consumer products dearer- . In other countries, devaluation has enabled the'"'"'

Government- to free the resources needed to initiate important infrastructure projects. -Since the rural sector predominates in the economies of

African countries, the depreciation of a currency may, in such oases, * have beneficial consequences if the authorities take appropriate collateral

measures, especially, as regards domestic prices-

Tho advantages of revaluation are lese obvious for developing

countries^ since it cannot improve their trade 'balances; If the country concerned; possesses a large industrial sector which uses imports W meet its raw material requirements, the revaluation of its currency would give firms an opportunity to stabilize or reduce manufacturing co^ts,, This is unfortunately not frequent in African'countries.

In addition, a large revaluation would;imply measures of relief in tfce fiscal or customs field in' order to ensure that exporting sectors remained competitive, and large Government subsidies for rural areas in order to support the incomes of the peasants. Revaluation nay thus make it more difficult to introduce the adjustments necessary for the better

allocation of resources«

Page 8

. ^ Anticipated results of the monetary crisis on the foreign trade of

the Afrioan countries ■ : .

On the basis of the theories discussed above, some change in direction

./by the export and import trade of the. African countries could be expected

following the parity changes which took place after August 1971.

The depreciation of some African currencies should in theory result in an expanding export trade while at the same time limiting the growth of the import market. The appreciation of others would normally produce theopposite effect. However, the extent of these movements will depend

on the elasticity of supply and demand where exports and imports are

concerned.

Fluctuations in the exchange rate of the currencies of the trading

partners of the African countries will also affect the growth of both exports and imports, but this effect will also be determined by the

elasticity of supply and demand. Moreover, decisions taken by other

developing countries will have a ccmsiderable impact on the competitiveness of African exports, especially those which are traded on free markets.

The pattern followed by the exchange rate of US dollar and pound sterling is particularly significant where exports from the developing countries are concerned sinpe prices of raw materials are usually quoted in oue or the other of these currencies. It must also be borne in miiid that the United States of America dominates the market for a considerable number of commodities either as a producer of such commodities as soya and aluminium or as a consumer of,,for instance, coffee and bauxite.

Prices of commodity products have been fluctuating tremendously in recent years. The supply and demand position of the specific products concerned obviously lies at the root of these- price changes, but they have been greatly strengthened by speculation brought on by fluctuating exchange

rates and uncertainity on international markets.

The variations in the prices of some, basic commodities shown in

IX* 2 reflect the Senera3- direction of this trend. After declining in

1372, prices made a notable recovery in 1973; however, the rise of

prices in dollars at their current established rate is significantly lower than the real growth if the depreciation of the dollar is taken

into account. The price of coffee expressed in dolalrs at their

established rate at the end of 1973 did not differ significantly from prices which prevailed at the beginning of 1973 eventhough a 13 per cent rise is shown in the quoted price which increased from 47.8 to 54 oents a pound during the same period. On the other hand, the production of

some agricultural exports stagnated or even declined because of climatic

difficulties-

E/CH.14/AMA/56

i . ' ; Page 9

As for the impact of the international monetary crisis on African imports, the outlook is more unfavourable* As was pointed out above, there is little elasticity in the demand for imports owing to the import structure

and the equipment requirements of t)ie jcottfitries. concerned* As a Result, devaluation purchases of consumer goods and investments made abroad cannot be inhibited by devaluation* Import payments in local currency are thus likely to increase to such art extent that the devaluation 1b-.at least

offset. ; -. , i .. :

It is possible to limit this increase by maintaining a link with the currency of the leading supplier} however, African countries whioh maintain large-scale trade relations with the Federal Republic of Germany" and

Japanese yen, particularly where purchases of capital,goods are concerned.

Monetary disorders were •. accompanied by a certain -amount- of inflation in the industrialized countries due to the dollar devaluation and a

surplus of international liquidities, and the African countries were .

forced to bear the consequent price rises when they purchased foreign goods.

Moreoverf unoertainities on the exchange marKets and payments restrictions introduced by many industrialized and developing countries probably resulted in some over-invoicing of imports to counter-balance exchange risks an#

often to long delays in deliveries* The monetary crisis thus created new barriers to intra-African trade, especially for countries with- non-,,;,

convertible currencies, '■■

V- Attempt to assess the effects of the monetary crisis on the foreign trade of African countries

As shown above, the monetary crisis might have raised the dollar ' value of exports at current pricesf but,it might also have raised the*./

current dollar value of imports7 and the latter increase-may-have been, the greater one.- ■

This assumption can be tested by examining the overall trade pattern of the African countriesr compering the growth of exports and imports;

before the international1monetary crisis with their growth Eince 1971*

For this purpose", the pre^crisiti period will "be considered ;to .be" the ;■

3 years in the period 1968-197C Since statistics on the overall trade of African countries are not available ^or periods later than 1972, the period of the monetary must'be confined to the years 197"! and 1972* ;;

The annual average growth rate of exports from African countries, fell from somewhat higher -than 14 per cent in the period 1969-1970 to about 10 per cent in the period.. 1971-1972 (see table 3)- This drop in, the jrate

of increase of exports was especially apparent in 1971? when the exports receipts of African countries grew by only 2 per cent., ;,

Table 2; variations to the prices of selected basic oommodities,;

January1970351 January1971444 January1972367 January1973448 Marofl1973443 June1973516 September1973548 December1973791 ■i.hi■'" Source:OilWorldt (1)Dollars

USdollarspermetricton 351 444 338 413 367 428 454 656

334 364 235 231 315 464 550 1,068

334 364 216 213 261 385 456 886

264 277 193 210 266 406 407 583

264 277 178 193 221 337 337 483

38-98 25.72 37.14 43.95 70.72 81.87 66.47 TimesandInternationalCoffee,Organization 41,206asfromMarch1973.

38.98 29-72. 23.68 34-20 36.44 58.64 67.89 55-12

Coffee

(!) All

UScentsperpound

(1)

Cotton

(2)

39.1 42.2 42.2. 47.82 50.3 48.9 50.3 54.0

39.1 42.2 38.9 44.03 41.7 40.5 41.7

28.13 ■>•• 6•• 39-30 42.62 52.92 86.68 83-31

28.13 ••• •♦• 36.19 35#3 43.9 71.9 69-1

E/CN.14/AMA/56

Page 11

Table 3s Destination of exports from Afrioar^, 1968-1972

Destination

Belgium

Fed.Rep. of Germany France

Italy

Netherlands Norway Portugal Spain Sweden Switzerland United Kingdom Canada

United States Japan

Brazil

African countries Other countries

(Total

1 1

1

8 1968

498.6 ,046.0 ,574.8 826.1 531.4 49.7 173.8 185.8 52.8.

81.3 ,326.4 60.1 722.5 334.8 35-6 498.6 960.1 ,958.4

1 1 1

1

1

10

1969

Million!

515.4 ,190.9 ,799.8 ,022.2

687,3

48.8 208.0 226.0 86.3 87.3 ,467.0 67.4 737.4 455.5 54.5 542.6 ,302.0

,498.4

of

1 1 1

1

1 11

1970 US dollars

648.3 ,201.4 ,954.2 ,184.1 804.3 59.3 215.2

276.9 95.6 90.5 ,596.8 79.5 832.7 529.5 65.7 616.6 ,444.4 ,695.0

1 1 1

1

1

1

11

1971

500.1 ,470.6 ,767.3 ,132.3 685.6 65.1 202.3 348.8 87.6 116.0 ,565.0 106.3 ,027.6 506.8 79.8 704.1 ,568.5 ,933.8

1 2 1

1

1

1

14 1972

551.7

,794.0 ,131.6 ,250.7 686.5 6O.4

224.2

456.9 135.0 139.4 ,627.0 237.3 ,312.9 631.0 110.2

794.5 ,893.3 ,036.6

Sources IMP, IBRD, Direotion of Trade Annual 1968-1972.

1/ Not including the Republic of South Africa.

Page 12

Although all of this drop.in the rate of- growth can hardly be attributed to the monetary crisis, the fact that it took place at the same time is

revealing. It is also interesting to note that the slow-down of 1971 occurred bi. almost" all the'leading inarlcets of African products and that,

where a number of them were concerned, specificrily Prance, italy, the

Netherlands and the United Kingdom^ there was even a decline in export receipts although eales to the Federal Reryublic of Germany and the

United Staten of'America rose significantly during tho same year.

In 1972 exports ro.ee by almost ,1.8 per cent, bringing in slightly more than $14. thbus&nd million. This movement too was virtually universal

in scope and took in all the leading outlets of tho African countries.

Sales to the- United States rose 'by about 30 per cent, and"purchases by Prance9 which has been the leading patron of the African countries for a

number of-ysar3y exceeded $2 thousand million for the first time-

Because the dollar had depreciated in the course of the period

1971-1972, exports increased at an average rate of only about 5 per cent

over the 2-year period when the increase is expressed at the constant

dollar rate. The impact of the fluctuating exchange rates in the import ing countries en sales made by African countries is not apparent since

exports expanded in botl> the United States and in the Federal Republic during the monetary crisis0

These broad trends ,can of course, be explained by the performance

of the leading exporting countries of African:and of the principal exports

of those oountries* The slow-down in growth observed in 1971 is borne

out in table 4- which shows the growth of exports from the'leading African

exporting countries during the period 1968-1972.

In 19J1 ealss dropped in all the leading exporting countries which "

do not produce petroleum. This situation obviously reflects the price

■pattern of fcasdo aommodities, which oomprise the leading exports of African- oomitriefl:, tRe proof being that exports rose again the following

year

The petroleu*-produoing countries still head the list of principal exporters, however. The Arab Republic of Libya a$d Nigeria had exports which wero well in excess of $2 thousand million while Algeria's exports brought in over $1 thousand millioa,in 1972- These three countries

are followed by ZaSTrs and Zambia, which are copper producers. The

Ivory Coast and Ghana, whose exports consist primarily in basic

commodities3 are also among the 10 top exporters of Africa.

As shown in sable 5, the value of imports rose eubB-t&ntially during

the monetary crinis. During the period 1971-1972 -the value of imports

grew by about 17 per cent, which was faster than in the period 1969-1970,

when it rose by about 14 per cent, and higher than the rate of increase

of experts. This trend ia the rate of growth of imports acoords with the assumption we are testing*

Page 13

Table 4i Exports from the leading African exporting countries 1968-1972

Destination f - "•

Algeria

I*

Angola Gameroon Gabon ; Ghana.

Ivory Coast Kenya <

Liberia

Libyan Arih Rep*

Madagascar Morocco Mozambique

Nigeria '

Senegal Sudan \

Tunisia *

Uganda - United Republic of Tanzania

Salre:

Bambia

Dther African countries

Total

1968

831 268 187

127

332:

423 253 170 : 1,866 ' 1t6

442 153 592 '■

151

232 160 215

240

579 761 860

8,958

1969

la mill

938 327 233 148 327 l

461 274 196 2,167 119 482 142 905 127 240

171 225 253

' 684 '

1,073 1,006

10,498

1970 ions of US d

1,009 4?3 231 121

458 469 305 2t4 2,366 163 488 156 1,239 152 298 184 279

259 : 816 "

1,001 1,064

11,695

1971

ollars

. 915 .408 :

205 201 430 456 314 338 2,-419

■147 544 160 1,811 125 329 -217 260 278 586 668

1,123 .

11,934

1972

1,258 509 238 253 488 601 332 382 2,470 159 668 244 2,184 236 390 323 269 287

605

740

1,401

14iO37

Source; IMP, IBRD, Direction of Trade Annual 1968-1972.'

E/CH.I4/AMA/56

Page 14

Table 5: Imports to African countries-4 1968-1972

Origin

Belgium Fed. Rep. of

Germany Prance

Italy

Netherlands Norway Portugal Spain Sweden Switzerland United Kingdom Canada

United States Japan

Brazil

African countries Other countries

Total

1,

1

7 1968

3

208.7 601.1 660.1 513.0 245-3 .

27.1 219.2 53.6

64.2 65-6 969.3 32.4 801.7 316.7 47-1 509.3

,356.7 • ,691.1

1969

ji millions 0 261.

726.

1,698.

545-

j

29- 234.

81, 74.

79- 1,088,

30'

840 373 17 594 1,568 8,507

9 .

1

9

1

5 3 8

5

4 :

1 ; 9 6 .1 .5

■5 :

.1

• 3 .6

1970

f US dollars

331.

882.

2,001.

597.

290.

43.

247«

101.

100.

93.

1,231 46 995 472 41 619 1,822 9,918

1

7 4 5 8 0 3

•9

1

7 '

.2 ■

.9

.1

.5 .3 .3 . .4 ■ .2

1, 2,

1

1

2

12

1971

352.8 149.3 316.4 756.8 330.4 75.7 259.6 155.8 151.1 : 132.6.

,589.4:

86.7 ,134.6 672.7 75-8;

708.2

,148.9 ,096.8

1, 2i 1i

1

2

13 1972

436.

219.

606.

084.

432.

154.

227*

252,

156,

► 520' 131 977 726 105 780 ,545 ,607

8 9 6 7

1 1 6 2 2

6

>2

>5

• 5 -4 .0

♦ 2 .1

• 7

Source: IMP, IBRD, Direction of Trade Annual 1968-1972,

\] Not including the Republic of South Africa.

The growth of imports was particularly rapid in 1971? when they increased, at a rate of 22 per cent, but this figure is greatly exceeded by the rate of inorease of importe from -the Federal Republic.&f,Germany and Japan^ which were 30 and 42 per cent, respectively* Purchases by the United States of America and intra-African imports grew by only 14 per cent. These movements seem to reflect the. inelasticity of.jthe demand for imports in the face of price changes.

In 1972 imports for the African countries as a whole rose by a comparatively moderate 12.5 per cent* Purchases from the Federal Republic of Germany and Japan grew at a higher rate while those from the United Kingdom declined slightly and those from the United States dropped significantly* Italy, however, managed to increase its sales to Afrioan countries by 43 per cent*

The principal African importing -countries are essentially the sane countries as those referred to under exports* Nigeria remains in second place, but the leading importing country in Africa in 1972 was Algeria*

which imported 11,791 million in goods out of a total of 113.608 million worth of imports for all the Afrioan countries covered in this study

(see table 6)*

. The sharp rise in imports by African countries in 197.1 resulted in a deficit overall balance of trade for the first time in 4 yeatfe* "During the period 1968-1970 the surplus in the balance of trade of the African countries as a whole had fluctuated between $1 and 2 thousand million*

The recovery made by exports in 1972 meant that imports could be covered, but the surplus in Africa's overall balance of trade amounted to only

£429 million.

The broad analysis made above does not provide a definitive reply, as to the impact of the monetary crisis on the foreign trade of Afrioan countries, and for that reason it would be a good idea to undertake a detailed study of the'exports and imports of the countries listed in tables 4 and 6. The representatives of the central banks of those

countries might tell the seminar what their experience in this connexion has been.

VI- Measures by which African central banks can contain or avoid the harmful effects of the crisis

The measures listed below, which, it is suggested, should be discussed in the seminar, could limit the harmful effects of the crisis* Some are

■short—term, some medium-term, and some long—term measures.

The- first series of measures inolude: -

(i) Action relating to exchange rates * "

Monetary authorities could decide to change the parity to further their objective of redressing the balance of trade and the balance of payments* ThiB could be done by setting limits on the amount by which local currencies could fluctuate in relation to an intervention currency or by gradually depreciating (or revaluating) the local currency as

appropriate.

E/CN.14/AMA/56

Page 16 • ^-

Table 6: Imports by the leading-African importing countries. 1968-1972

■*

Algeria Angola Cameroon Gabon • Ghana''I\ ~

Ivory Coast Kenya

Liberia-

Libya&'Arab Republic Madagascar

Morocco Mozambique Nigeria . Senegal Sudan Tunisia Uganda

United Republic of Tanzania ■ - ZaSre

Zambia

Other African countries

Total

Source: IMP, IBRD, '.

1968

807 308 183 64 306 316 356 ."" 109 640

170 552 233 540

179

■ 258 218 164

. 255

322

' 505 1,206 7,691

Direction

1969

In millions of

1,009 328 207 82 349 . 337 362

■115 676 187 559 . * 261 696 208 256 263 175

241 ;-

452 480 1,265 8,508

l of Trade Annual

1970

US.dollars

1*257 368

■ 242 80 411 388 442 150 554 192 686 ■■

326 1,059 191' 288 306 ; 172 318 577 525 1,386 9,918 1968-1972-

1971

1,465

422 250 105 48O 399 56O

425

817 213

■ 777 335 1,510 218 331 346 250 382 722

478 1,612 12,097

1972

1,791

' ' 402

289

■ 156:

' 373

466 502 766 1,285 205 796 365 1,534 339

;421 486

- 150

357 559 545 1,821 13,608

E/CK-14/AM&/56

Page 17

(ii) Action in respect of interest rates with a view to enoouraging

the rapid repatriation of export receipts or discouraging an excessive increase in imports;

(iii) Introduction of a system whereby the central bank covers the

export receipts of the leading undertakings or exporter group in the country)

(iv) Revising exchange oontrol regulations to reduce ambiguities

where settlements are concerned.

Medium and long-term measures include:

(i) The development of intra-African trade and regional integration

with a view to lessing, in so far as is possible, the impact of foreign currency fluctuations on African economies$

(ii) The participation in diversification funds by African central

banks;

(iii) The harmonization of the position taken by African countries

in the prooess of reforming the international monetary system with a view to safeguarding a liberal and multilateral trade and payments system and to ensuring that the developing countries will be provided with additional resources to finance their growth.