Question

You are an IMF official going to a country whose export earnings are not able to...

You are an IMF official going to a country whose export earnings are not able to pay for imports. The government has requested a loan from the IMF. Which areas would you recommend the government to cut: (1) education, (2) salaries for officials, (3) food subsidies, and/or (4) tax rebates for exporters?

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Answer #1

Tax rebate for exporters

The government should cut on the tax rebates that it offers to the exporters. This is because due to the tax rebate offered to exporters, the government is not able to generate enough revenue on the export of products due to which it's exports earnings are less and the government is in a net loss vis a vis import and export. If the government is able to charge export tax to the exporters, then export earnings will increase and the government will be able to use these export earnings to fund the import of products.

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