You immediately announce a devaluation of your currency, the CFA franc, which is set to the value of the French franc. The old value was 50 CFA francs per French franc. Now it is 100 CFA francs per French franc. Devaluation comes as a shock. People used to buying imported goods are unhappy because their purchasing power is lower.

Ms. Chang, the IMF economist, explains that people here are now living within their means. Before the devaluation, exporters were subsidizing them by making imports cheaper than they should have been.

Here are the good things that happen because of the devaluation:

• Exports are now competitive again without changing wages or taxes. The Trade Ministry reports that exports increase enough to continue payments on your foreign debt. Because imported goods are more expensive now, local industries expand to make and sell cheaper substitutes for imported products. That employs more people and adds to the size of the domestic economy.


• Tourism increases because foreigners visiting your country don’t have to spend so much of their money on hotels and services. This increases the amount of foreign exchange coming into the country.


• The IMF loan of foreign exchange comes through. This money allows your government to pay your other foreign debts while the economy improves. Your central bank is able to make foreign exchange available to allow businesses to continue to buy imports.

Because of the IMF loan, the economy recovers fairly quickly. You are re-elected as President.