What are the imports of Senegal?

What Happens when imports exceed exports too much?

• In the economics, I've studied that Exports - Imports > 0 is good! but what if imports exceed export? Why is government trying to keep imports and exports in balance? ...show more

• Answer:

  Consider the basic macro equation Y=C+I+G+X-M . X stands for export and M stands for imports. If X-M >0, then Y(income) goes up and it is good only to the exporting country, not the importing( receiving) countries. If M > X, it is not good for this same country because them there will be a reduction in Y since them X-M is negative. When a country exports more than it imports, the currency is stronger since it would be receiving payment in foreign currency. If the country is importing more than it is exporting, it would then be paying for the imports in hard currency thereby depleting its foreign currency reserve and the effect is that its currency becomes weaker. Governments try to keep both X and M in balance to maintain stable exchange rate which helps business predictability and planning rather than a case where the exchange rate is not stable and so businesses cannot really plan with reasonable degree of accuracy. There is balance of payment/trade between two countries when import by one is equal to export by the other in monetary terms. In other words, if the value of imports by USA from Japan is equal to value of exports to Japan by USA, then there is a balance of payments/trade. The same should be the case with Japan also. At the end of the day, the country having more exports to other countries than it imports from others is said to be having a favourable balance of payment and vice versa. Because some countries do suffer some disadvantages because of their level of development and so cannot really export much, they try to some extent to improve their X/M balance by introducing some restrictive tarrifs, bans, etc