ABSTRACT
The economic crisis of the 1980s in sub-Saharan Africa has set into motion major economic reforms in an effort to reverse it and embark on a path of renewed growth. The first half of the 1980s saw the response to the crisis dominated by recessionary stabilization measures (Ndulu 1990). Resource gaps were largely closed via autonomous cuts in aggregate demand and reduced economic activity. Being import dependent in both production and investment, reduced import capacity resulting from a continued decline in exports and cuts in net foreign resource inflows led to import compression and strangulation of economic activity. In a large number of countries, including Tanzania, forced import compression was implemented via quantitative restrictions. Exchange controls and trade policy rather than the exchange rate were the main instruments for managing the balance of payments. In spite of these measures and losses in growth, however, both internal and external imbalances persisted.
