The International Monetary Fund (IMF) has said trade payment restrictions can strengthen a country’s current account position, while capital controls can influence exchange rate movements depending on whether they are targeted at capital inflows or outflows.
The findings were contained in a new IMF paper titled “The Impact of Trade Payment Restrictions and Capital Controls on External Sector Balances,” prepared by Adam Jakubik, Effie Karfaki, Tobias Krahnke, Wenjie Li, Anita Tuladhar and Chenyu Xu. The study examined how restrictions on international transactions affect current accounts and real exchange rates, an area the authors said has received comparatively limited empirical attention.
According to the study, controls on capital inflows were positively associated with current account positions, while restrictions on capital outflows tended to weaken the current account by keeping capital within the domestic economy. The researchers also identified an exchange-rate channel, finding that inflow controls were associated with real currency depreciation, while outflow controls were linked to real appreciation. Trade payment restrictions were similarly associated with real appreciation.
The IMF, however, cautioned that the findings should not be viewed as universal outcomes because the research relies on panel regressions that capture average relationships across countries and over time. The authors noted that such restrictions are often introduced during periods of economic stress, making it important for policymakers to consider them alongside broader economic conditions when assessing external-sector developments.
The findings are particularly relevant to Nigeria as the country continues to manage its external balances and foreign exchange market. The Central Bank of Nigeria has projected that the country’s current account surplus could rise to $18.81 billion in 2026, equivalent to 11.16% of GDP. Nigeria recorded a $4.98 billion current account surplus in the first quarter of 2026, although the country continues to face pressure from imports, services payments and investment income outflows. The IMF study suggests that policymakers may need to carefully assess the wider effects of trade and capital restrictions when designing measures aimed at strengthening external balances.
source: Nairametrics
