Equilibrium Real Exchange Rate in Two African Countries
|Base year||Kenya 1989||Madagascar 1990|
|(In percent of base-year GDP)|
|Targeted improvement in resource balance 1/||1.3||0.6|
|Actual resource balance 2/||-5.7||-10.3|
|Target resource balance||-4.4||-9.7|
|Target public debt/GDP ratio||50||80|
|Net public capital inflow 3/||3.5||5.6|
|Interest payments on target public debt 4/||-1.8||-0.9|
|Net official transfers||2.1||6.0|
|Net private flows||0.6||-1.1|
|Targeted government primary balance improvement 1/||2.1||-0.3|
|Actual government primary balance 2/||-5.5||-5.8|
|Target net foreign resource transfer||3.8||10.8|
|Targeted annual reduction (-) in domestic debt||-0.5||-4.7|
|Targeted increase in level of activity||3||10|
|(In percentage change, unless otherwise indicated)|
|Reduction (-) in protection 5/||-20||-40|
|New (old) level of implicit export tax rate 6/||(—)||11 (10)|
|Real “other demand”||(—)||(—)|
|Government wage bill||7||7|
|Nominal exchange rate||33||33|
|Prices domestic goods||21||19|
|Real exchange rate 7/||10||12|
|Resource balance in foreign currency 1/||1.3||0.7|
|Government primary balance 1/||2.0||-0.2|
|Real output 8/||3||9|
In foreign currency at base-year exchange rate in percent of base-year GDP.
Corrected for exceptional circumstances in the base year, such as sale of stocks. Corrected for effects of expected terms of trade change.
Obtained from the target debt/GDP ratio and a nominal GDP growth rate of 7 percent per year.
At present average borrowing conditions for the country.
Reduction in the average tariff rate on imports of goods and nonfactor services.
Increase in implicit export tax rate, defined as government revenue from exports over value of exports of goods and nonfactor services. The increase is achieved by allowing a less than 100 percent pass-through of the nominal exchange rate into producer prices and margins. See footnote 2/ in Appendix I on page 31.
Defined as the nominal exchange rate index over the domestic price index.
Weighted average of output increases in exports and domestic goods sectors.