Does devaluation of currency help to reduce the current account deficit?

The impact of currency devaluation on a country's current account deficit is complex and can vary depending on a range of factors, including the nature of the economy, elasticity of demand for exports and imports, and time frame considered.

Devaluation makes a country's goods and services cheaper for foreign buyers, potentially increasing demand for exports. At the same time, imports become more expensive for domestic consumers, which can lead to a reduction in the volume of imports. In the short term, these effects can provide a boost to the current account balance by increasing export revenues and reducing import expenditures.

However, while devaluation may show immediate benefits, it does not guarantee a long-term resolution to a current account deficit. Structural issues in the economy, price inelasticity, and adjustments in consumer behavior often limit the sustainability of these effects. For example, if consumers continue to prefer imported goods or if exports do not respond quickly enough to the devaluation, the deficit may persist despite lower currency value.

In essence, devaluation can have a positive impact on the current account deficit, especially initially, but the assumption that it will always help in the long-term is overly simplistic. So, the assertion that the statement is false reflects an understanding of the nuances and longer-term challenges associated with currency