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Country: Sweden Committee: Economic and Financial Topic: Devaluation of Currency Delegates: Mr. Dan Richards and Mr. Andrew Klein Devaluation of currency has become an increasingly important issue as the world economy becomes even more interconnected. The world economy is a result of an ever growing and ever-changing global dynamic. This dynamic formed both by the buying power of a state, dependent on their GDP and the value of their currency relative to other currencies, and the balance of trade a nation has, the value of exports verses the value of imports. Devaluation of currency is generally a negative economic signal; however, it can be both necessary and beneficial to a nation to allow its currency to devaluate, including discouraging informal value transfer systems. These situations include, but are not limited to, to helping to increase exports and discouraging imports, boosting tourism, stimulating growth, and controlling the balance of power, monetarily speaking, in a region. Devaluation of currency, however, generally negatively affects states that are trading with the state, which is undergoing devaluation of their currency. This negative impact is in the form of general devaluation of currencies though out the region, and a destabilization in the balance of trade among the nations whom trade with the state undergoing currency devaluation. Generally, small developing nations are under the greatest pressure to devalue there currency. A major part of this pressure is that developing countries often fix there exchange rate with a more stable currency such as the Euro or the United States dollar. This can often be good, however is the foreign currency’s value increases significantly it can result in a destabilization of the developing economy. To avoid this developing nation is often forced to devalue its currency to keep the economy operational. When Developing nations are faced with such crises as these, the IMF often sets regulations, which the developing nation must follow to gain economic assistance. These generally include but are not limited to: adoption of strict government spending controls, and devaluation of currency. The value of a currency is controlled in several ways. The simplest of these methods involves keeping large amounts of foreign currency in reserve and pumping it in to the global economy thus reducing the price that people will pay for it effectively increasing or maintaining exchange rates. It is the belief of the Reoeringsknsliet of Sweden that Sweden should maintain a policy of zero devaluation in currency based, on the hope of adopting Euro as the Swedish currency. Sweden is a member state of the European Union; however has yet to adopt the Euro as its official currency because it was defeated, narrowly, in a binding nationally referendum. Sweden believes that through controlling the discount rate they can prevent the devaluation of the Krona even when faced with regional pressures to devalue or to allow there currency to free float as Finland has done. Sweden believes that its ability to hold firm in the face of such pressure, is due to its minimal amount of debt, relative to GDP, and its devotion to short-term extraordinary measures to stabilize the Krona in the past. Sweden further believes that devaluation in developing countries should only be used as a last resort and that other means of stabilizing a economy should first be explored.