International Constraints and Economic Policy-Making in African Countries

Abstract

While governments everywhere are faced with formulating economic policy in order to achieve national objectives, the world economic system has evolved in ways that have made countries interdependent. International linkages through the balance of payments permit spillovers, internationally, of the effects of policy actions and non-policy disturbances, but they also impose constraints on the types and extent of use of various instruments that policy-makers must take into consideration. Particularly in Africa, the implications of international constraints for the conduct of economic policy is a topical issue. This topicality is due to the fact that although economic openness generally offers an opportunity for gains from international trade and capital flows, it has remained a major source of shocks to African economies. Moreover, while the benefits and tensions associated with economic interdependence are scarcely new phenomena nor limited to Africa, the generally poor economic performance of African economies in the 1970s and 1980s has raised issues regarding the effectiveness of the conduct of economic policy in African countries in the presence of external shocks and the role of the international financial system in African policy-making.