The Balance of Payments Adjustment Process in Developing Countries PDF
Preview The Balance of Payments Adjustment Process in Developing Countries
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U.K. Pergamon Press Ltd., Headington Hill Hall, Oxford 0X3 OBW, England CANADA Pergamon of Canada Ltd., 150 Consumers Road, Willowdale, Ontario M2J 1P9, Canada AUSTRALIA Pergamon Press (Aust) Pty. Ltd., P.O. Box 544, Potts Point, NSW 2011, Australia FRANCE Pergamon Press SARL, 24 rue des Ecoles, 75240 Paris, Cedex 05, France FEDERAL REPUBLIC Pergamon Press GmbH, 6242 Kronberg/Taunus, OF GERMANY Pferdstrasse 1, Federal Republic of Germany Copyright © 1980 United Nations Library of Congress Cataloging in Publication Data Dell, Sidney Samuel. The balance of payments adjustment process In developing countries. (Pergamon policy studies) "Published in cooperation with the United Nations." Bibliography: p. Includes index. 1. Underdeveloped areas—Balance of payments. I. Lawrence, Roger, joint author. II. Title. HG3890.D44 382.17Ό91724 79-22818 ISBN 0-08-025577-9 All Rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means: electronic, electrostatic, magnetic tape, mechanical, photocopying, recording or otherwise, without permission in writing from the publishers. Printed in the United States of America Second Printing 1981 Foreword It has been a major preoccupation of the United Nations Conference on Trade and Development (UNCTAD) , ever since its establishment in 1964, to explore the relationships between problems arising in the fields of international trade, international finance, and the international monetary system, and to seek solutions to these problems through negotiations among developed and developing countries. UNCTAD initiatives have, at various times, included the development of schemes for linking international currency creation to the provision of development finance, and for effecting improvements in the compensatory financing facility of the International Monetary Fund (IMF) ; some of the latter proposals were subsequently adopted and enacted by the IMF. Because of the interdependence of problems in the three separate spheres of money, trade, and finance, it is natural that the severe disequilibrium in the international monetary system that developed during the 1970s should have been a matter of deep concern in UNCTAD. That disequilibrium, accompanied by international currency instability on a scale not seen since the Great Depression, has had a profoundly detrimental effect on trade and development, especially of developing countries, and endangers basic goals of the United Nations for improving living conditions in these countries. It is, therefore, one of UNCTAD1 s most important tasks to determine the factors responsible for the present malaise and the options available to the international community for resolving the problems involved. Aware of UNCTADfs work on the relationship between changes in the international monetary system and the devel- vii viii FOREWORD opment problems of the Third World, the Intergovernmental Group of Twenty-four on International Monetary Affairs - a representative group of developing countries - approached the Secretary-General of UNCTAD in January 1975 with a view to obtaining UNCTAD assistance, with the support of the UNDP, in the elucidation of issues that were the subject of current negotiations in the international monetary field· The Administrator of the UNDP and the Secretary-General of UNCTAD responded by establishing a project designed to provide the assistance that had been requested by the Group of Twenty-four. The present volume deals with one of the outstanding issues of concern to the Group of Twenty-four - namely the manner in which the burden of adjustment to balance of payments disequilibrium in the 1970s was distributed between developed and developing countries. It shows that developing countries have been faced with a burden of adjustment out of all proportion to the degree of their responsibility for the international disequilibrium that has prevailed in recent years. The report makes a number of recommendations of great importance for remedying this situation. These include a proposal that in determining the appropriate volume of balance of payments support to a developing country, and the conditions required for the provision of that support, it is important to distinguish between those elements of a balance of payments deficit for which the country is itself responsible, and those elements that are due to factors beyond its control. Moreover, the remedies for disequilibrium should be selected in such a way as to reconcile the need for balance of payments adjustment in the short run with the basic requirements of development in the longer run, and should in no case subordinate the latter to the former. In many cases, especially where adjustment calls for changes in the structure of production or trade, balance of payments support may be needed over periods considerably longer than those that are standard under existing arrangements. It is, therefore, suggested that a new facility be created to bridge the gap between the short-term lending of the IMF and the long-term lending of the World Bank. I should like to endorse these conclusions and recommendations of the report, and commend them to the attention of the international community. The report was prepared, at the request of UNCTAD, by Sidney Dell and Roger Lawrence. They, in turn, drew upon a series of case studies of balance of payments adjustment prepared specially for the present project. A list of the case studies, and those who prepared them, is included; they are available on request to the Division for Money, Finance and Development, Palais des Nations, Geneva. FOREWORD ix The report was submitted to the Group of Twenty-four in March 1979 and is now made available to the general public. Gamani Corea Secretary-General of UNCTAD July 1979 Country Analysts Brazil Mr· Edmar L. Bacha, Professor Department of Economics University of Brasilia Brasilia, Brazil India Mr. Bimal N. Jalan Economic Adviser to the Government of India New Delhi, India Indonesia Mr. Robertus Suhartono Former Staff Member of ESCAP (Economic and Social Commission for Asia and the Pacific) Bangkok, Thailand Ivory Coast Mr. Alassane Ouattara Director of Research Central Bank of West African States Dakar, Senegal Jamaica Mr. Gladstone Bonnick Former Deputy Governor Bank of Jamaica Kingston, Jamaica Mr. W. Carr, Bank of Jamaica Mr. E. Taylor, Bank of Jamaica Kenya Mr. Tony Killick, Professor Department of Economics University of Nairobi Nairobi, Kenya XI Xll COUNTRY ANALYSTS Mr. Joseph K. Maitha, Professor Chairman, Department of Economics University of Nairobi Nairobi, Kenya Korea, Republic of Mr. Won tack Hong, Professor Department of International Economics Seoul University Seoul, Republic of Korea Peru Mr. Carlos Alberto Bolona Behr, Professor Universidad del Pacifico Lima, Peru Mr. Claudio Herzka Buchdahl Formerly of the Central Reserve Bank of Peru Lima, Peru Mrs. Rosemary Thorp University of Oxford Institute of Economics and Statistics Oxford, England Philippines Mr. Romeo Bautista, Professor School of Economics University of the Philippines Quezon City, Philippines Sri Lanka Mr. Nihal M. Kappagoda Vice-President International International Development Research Centre Ottowa, Canada Mrs. Suzanne H. Paine University of Cambridge Faculty of Economics and Politics Cambridge, England Tanzania, United Mr. Brian van Arkadie Republic of Institute for Social Studies The Hague, Netherlands Mr. Reginald H. Green, Professor The Institute of Development vStudies University of Sussex Brighton, Sussex England Mr. Delphin G. Rwegasira Director of Research Bank of Tanzania Dar es Salaam, Tanzania COUNTRY ANALYSTS xiii Uruguay Ms. Ana Maria Teja University of Uruguay Montevideo, Uruguay Mr. Israel Wonsewer Consultant Montevideo, Uruguay Zambia Mr. Rolf M. Jeker Formerly of Schweizer Institut fur Aussen Wirtschaft St. Gallen, Switzerland Mr. G. Mbulo Director of Research Bank of Zambia Lusaka, Zambia LIST OF TABLES Table 1.1. Current Account Balances of IMF Member 2 Countries Table 1.2. Selected Price Indexes for Internationally 4 Traded Goods Table 1.3. Quantum Indexes of Exports of Developing 6 Countries Table 1.4. Coefficient of Variation of Terms of 8 Trade Indexes: Selected Groups of Countries, 1960-1975 Table 1.5. Price Changes Affecting Trade Balances 9 and Their Decomposition, 1973-1976 Table 1.6. Principal Factors in Year-to-year 11 Deterioration in Trade Accounts: 1962-1976 Table 1.7. Import Capacity and Economic Performance 15 of Non-Oil Developing Countries Table 1.8. The Balance of Payments of Non-Oil- 17 Exporting Developing Countries: 1971-1977 Table 2.1. Price Changes and Trade Balances: 22 12 Developing Countries Table 2.2. Balance of Payments of Ten Non-Oil- 24 Exporting Developing Countries: 1970-1977 Table 2.3. Indexes of Import Capacity and its 29 Components : 1971-1977 Table 2.4. International Bond Issues and Publicized 41 Eurocurrency Credits: Eleven Developing Countries Table 2.5. Net Changes in the Claims of US Banks on 42 Seven Developing Countries COUNTRY ANALYSTS xiii Uruguay Ms. Ana Maria Teja University of Uruguay Montevideo, Uruguay Mr. Israel Wonsewer Consultant Montevideo, Uruguay Zambia Mr. Rolf M. Jeker Formerly of Schweizer Institut fur Aussen Wirtschaft St. Gallen, Switzerland Mr. G. Mbulo Director of Research Bank of Zambia Lusaka, Zambia LIST OF TABLES Table 1.1. Current Account Balances of IMF Member 2 Countries Table 1.2. Selected Price Indexes for Internationally 4 Traded Goods Table 1.3. Quantum Indexes of Exports of Developing 6 Countries Table 1.4. Coefficient of Variation of Terms of 8 Trade Indexes: Selected Groups of Countries, 1960-1975 Table 1.5. Price Changes Affecting Trade Balances 9 and Their Decomposition, 1973-1976 Table 1.6. Principal Factors in Year-to-year 11 Deterioration in Trade Accounts: 1962-1976 Table 1.7. Import Capacity and Economic Performance 15 of Non-Oil Developing Countries Table 1.8. The Balance of Payments of Non-Oil- 17 Exporting Developing Countries: 1971-1977 Table 2.1. Price Changes and Trade Balances: 22 12 Developing Countries Table 2.2. Balance of Payments of Ten Non-Oil- 24 Exporting Developing Countries: 1970-1977 Table 2.3. Indexes of Import Capacity and its 29 Components : 1971-1977 Table 2.4. International Bond Issues and Publicized 41 Eurocurrency Credits: Eleven Developing Countries Table 2.5. Net Changes in the Claims of US Banks on 42 Seven Developing Countries
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