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Extra info for Agricultural pricing policy in Eastern Africa: a macroeconomic simulation for Kenya, Malawi, Tanzania, and Zambia, Part 76
Rural. The balance of payments objective is to achieve a situation in which the country's balance (typically a deficit) on the current account of the balance of payments is exactly offset by the country's balance (typically a surplus) on the capital account -- what macroeconomists call "external balance". In other words, capital inflows of various kinds (such as grants, loans, and foreign direct investment) exactly offset on a more or less permanent basis the country's propensity to import more goods and services that it exports, so that the central bank's foreign exchange position is constant.
Page 3 2 Historical Background The purpose of the present chapter is to provide a brief historical background of the four countries in this study, focusing on those aspects of their political and economic history which are particularly relevant to the topic of this one-day seminar. In particular, it focuses on the economic structure of the four countries; agricultural production; agricultural exports; agricultural development policy; agricultural marketing, and exchange rate, monetary, and fiscal policies.
The most important fluctuations originating in the international market are demand-side fluctuations which directly affect the prices and quantities of developing countries' agricultural exports, their earnings of foreign exchange, and consequently, their capacity to import capital and intermediate goods for industrialization. The most important fluctuations originating in the domestic market are supply-side fluctuations such as drought-induced declines in agricultural production which affect both the quantity of agricultural exports and the quantity of agricultural food production.