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Volume :18 Issue : 69 1993      Add To Cart                                                                    Download

THE EFFECT OF CURRENCY DEVALUATION ON THE PERFORMANCE OF THE OMANI ECONOMY

Auther : Dr. Saif S. Al-Sowaidi

 

           Devaluation is considered as a channel through which balance of payments account imbalances, amongst other variables could be corrected.  The current paper examines possible consequences of the devaluation of the Omani Riyal vis-à-vis the Dollar, which took place in January of 1986.

          Although improving government’s financing, reducing induced demand for foreign reserves (mainly by expatriate labor force) and improving the Omani balance of payments were amongst the planned objectives; findings do not provide sufficient evidence upon which one may argue that the government had adopted the correct strategy.  Most economic indicators do not show positive consequences on the domestic economy following the devaluation.  Moreover, government’s budget continues to suffer from deficits and capital inflow (mostly remittances) has shown no signs of retreating.

         Although more research is encouraged based upon the present evidence, one may argue that devaluation had little effect on the Omani economy.

 

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