A large current account deficit means that the value of exports of goods, services, investment income and current transfers, is much less than the value of imports of these items. If the government believes that the deficit is not a temporary phenomenon, it may attempt to reduce the deficit by taking one or more of a selection of economic measures. However, a country with large foreign currency reserves may decide to finance the deficit by running down some of these reserves and may not take significant additional actions for some time. Possible economic measures include the following policy tools.

Monetary policy. A government will often take deflationary measures to reduce the money supply. This may be through increases in interest rates, or attempting to reduce the money supply through actions such as credit restrictions, wage and/or price controls and reductions in government expenditure. Increased interest rates will tend to reduce local borrowing and demand for imports, and attract overseas funds into the country to take advantage of the higher interest rates (until interest rate and exchange rates are in equilibrium once more).

Fiscal policy. Governments often reduce consumer spending, including spending on imports, by increasing taxation.

Borrowing. The government may finance the deficit by borrowing from international commercial banks or international organisations such as the IMF. Such borrowing, however, does not tackle the underlying symptoms of the deficit. Exchange controls, tariffs, and quotas are all measures which may be used to reduce imports, and to reduce a current account deficit. However, these may be contrary to World Trade Organisation (WTO) agreements.

A further alternative is to stimulate exports through government subsidies, although these too are often restricted by the WTO.

Impact on multinational company operating in the country concerned
Most of these policies tend to reduce domestic economic growth and increase unemployment so they are often detrimental to a multinational company operating in the country concerned. The main exception to this is where the multinational exports a high proportion of its products, and the incremental demand stimulated by the devaluation/fall in value of the local currency results in an overall increase in the present value of cash flows to the multinational.

The impact of higher interest rates usually results in higher borrowing costs for a multinational company. However, if the company is a net investor in the money market of the country concerned an increase in interest rates may be beneficial.