The Nexus Between Macroeconomic Instability and Clove Export Performance in Zanzibar

Abstract

Agricultural exports remain the vital source of foreign exchange for small economies that heavily depend on traditional cash crops. In Zanzibar, clove exports contribute significantly to export earnings, employment generation, and rural household incomes. However, the performance of the clove export sector is strongly influenced by prevailing macroeconomic conditions. This study examines the relationship between selected macroeconomic variables and clove export values in Zanzibar, using annual time-series data from 1991 to 2023. The study draws on two frameworks: the macroeconomic theory, and the comparative advantage theory. It used the ridge quantile regression to analyse the influence of gross domestic product, population, exchange rate, inflation rate, interest rate, and world clove prices on clove export values. The results reveal that economic growth, population growth, inflation, and world clove prices are positively and significantly associated with clove export values. In contrast, interest rates are negatively associated with export performance; while exchange rate has varying impacts: positive and significant at lower quantiles, and negative and significant at higher quantiles. Based on these findings, the study recommends that the Zanzibar government pursue stable macroeconomic policies to maintain low and stable interest rates, and a competitive exchange rate. It further recommends improving access to affordable credit for clove farmers, strengthening domestic clove production capacity through better farming practices and inputs, and developing stronger international market linkages to stabilise and raise world clove prices. These measures are essential for enhancing the resilience and long-term competitiveness of Zanzibar’s clove export sector.