If a country is short of hard currency?

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If a country is short of hard currency?

if a country is trading and have short of hard currency(notes and coins) how should management prepare to negotiate price?

R M

When a country is short of hard currency, there are two things it can do:

1. Print more money. This is the easy way out - but it has the side effect of devaluing the currency (i.e. if you print more "pesos", each "peso" is going to be worth less). The net impact is that you skim off a bit of value from everyone holding your currency.

2. Raise interest rates. By raising interest rates on the money lent to you (the government), you make it more attractive for lenders. This way, you do not devalue the money - but now the side effect is that you owe interest on the money lent to you. This is what happens when you hear that the interest rate on the Treasury Bills went up.

MGN2006

A Country would produce more money surely. And the management would be the government. There would be no negotiation

razawar

Every country do international trade on two basis

1- Gold Reserves held by Federal Bank
2- Hard Currencies like US$, GBВЈ etc.

If hard currency is short then country will have to use its gold reserves and even if they fell low then Govt. will try top buy it from open market on its country by issues more domestic currenc. It will however casue

1- Inflation
2- Gold prices going up

It can only happen if courty's balance of payments is in negative i.e. its buying more but selling less on international market.

zorro

Shortly that country will increase the circulation of money that will generate inflation thus devaluation. The only way is to collect in advance, the risk is too high, reduce prices for payment in advance. The other is make a t riangle with a foreign bank that can back up the country.

ben b

If a country is short of hard currency, they can use a soft currency, such as chocolate coins.

Barking mad

Go dig up some more gold or diamonds.

interested_party

Most countries...

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