ABSTRACT
This chapter examines economic policy and its dynamic interaction with economic, social, and political forces over the four years of the Second Republic. This was a period in which a sharp decline in oil revenues plunged the economy into recession. Stripped of the veneer of much of its foreign exchange earnings, the difficulty of converting oil into productive assets was revealed. The 1982 budget was a travesty and totally irresponsible. It effectively masked an extremely serious economic situation that could be foreseen by August 1981 in the loss of reserves and the deficit financing of state expenditure. The loss of reserves prompted emergency stabilisation measures in April 1982. Advance deposits for imports, increases in import duties, and a review of import licences were introduced. There was also a reorganisation of the customs service and closure of private jetties in an attempt to reduce smuggling.
