Credits to the South and International Financial Relations

  • Amit Bhaduri
Part of the Vienna Institute for Comparative Economic Studies book series (VICES)


Recurring financial problems are usually a surface phenomenon reflecting deeper malaise in the underlying economic structure. International financial problems are no exception to this general rule. The recurring payments difficulties in international transactions faced by the non-oil developing countries of the South cannot therefore be understood in isolation from the pattern of international trade and capital movements in which they have been caught.


Current Account External Debt Current Account Deficit Current Account Surplus Official Development Assistance 
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  1. (1).
    M. Abdel-Fadil, F. Cripps and J. Wills, ‘A new international economic order p’, Cambridge Journal of Economics, Vol. 1, no. 2, June 1977, p. 207.Google Scholar
  2. (2).
    Approximately, OECD accounted for about 64 per cent of world exports in 1977, and of that total, nearly 70 per cent is accounted for by trade among the member countries. The Economist, February 10, 1979.Google Scholar
  3. (3).
    This is matched by corresponding deficits on invisible current account of both the oil and the non-oil producing countries. It is interesting to note that although rich countries as a rule have surplus invisible trade, the two otherwise major surplus countries, West Germany and Japan, had large deficits in invisible trade in 1976–77. The Economist, op. cit.Google Scholar
  4. (4).
    There is a sharp and increasing difference among members of the OPEC in terms of their balance of payments positions. A few ‘low absorber’ countries — Saudi Arabia, Kuwait, Qatar and United Arab Emirates — accounted for $ 33.6 billion, out of a total OPEC surplus of $ 34.1 billion in 1977. See, Morgan Guaranty Trust, World Financial Markets, September 1976 and June 1977.Google Scholar
  5. (5).
    This is the visible trade account. For some countries of South Asia, there has recently been some relief through net positive remittances from abroad, mainly from migrant workers to the Middle East.Google Scholar
  6. (6).
    Far Eastern Economic Review October 19, 1979, p. 56, based upon IMF, Annual Report, 1979 and World Bank, World Development Report, 1979.Google Scholar
  7. (7).
    Or, more exactly the ‘low-absorber’ countries in OPEC (see Reference 4).Google Scholar
  8. (8).
    These figures (among many floating alternative estimates) are based upon, World Bank, World Debt Tab/es 1976, vol. 1, pp. 31–33 and vol. 2 (relevant country pages).Google Scholar
  9. (9).
    See Ho Kwon Ping, ‘Caught in the oil-debt trap’, Far Eastern Economic Review, 19 October 1979.Google Scholar
  10. (10).
    See, D. O. Beim, ‘Rescuing the LDCs’ in Foreign Affairs, July 1977.Google Scholar
  11. (11).
    Based upon various published OECD reports, especially the 1978 report of the DAC Chairman, Maurice J. Williams.Google Scholar
  12. (12).
    Approximately, external debt grew at an annual compound rate of 21 per cent between 1967 and 1977, at current prices. More detailed statistical analysis shows definite acceleration of the rate of growth of external debt from slightly less than 15 per cent per annum to almost 31 per cent per annum during this period, so that an average (constant compound) growth rate seems misleading.Google Scholar
  13. (13).
    This is the percentage of debt service (interest and principal), summed over a given number of years — usually 5 or 10 years in accordance with banking convention — to the total outstanding debt at a given point of time. Thus, the time profile index is a ratio of two stock items (while the debt service ratio is a flow to flow ratio) at a given point, primarily used to emphasise the maturity structure and bunching problem of debt.Google Scholar
  14. (14).
    World Bank, World Development Report, 1979 Table 6.Google Scholar
  15. (15).
    D. Avramovic and others, Economic growth and external debt, Johns Hopkins Press, Baltimore 1964; G. Oh lin, Aid and indebtedness: the relation between aid requirements, terms of assistance and indebtedness of developing countries, OECD, Paris, 1966 and R. Solomon, ‘A perspective on the debt of developing countries’ in Brookings Papers on Economic Activity, No. 2, 1977.Google Scholar
  16. (16).
    This result was first observed by Domar and has since reappeared in various forms in the literature on external debt (see previous reference).Google Scholar
  17. (17).
    See, G. Papnek, ‘The effect of aid and other resource transfers on savings and growth in less developed countries’, Economic Journal, September 1972 and a particularly illuminating mathematical model along this line in B. Wasow, ‘Dependent growth in a capital-importing economy: the case of Puerto Rico’, Oxford Economic Papers, March, 1978.Google Scholar
  18. (18).
    For a brief account of how it happened in three countries — Argentina, Peru and Zaire — during 1976, see D. O. Beim, ‘Rescuing the LDCs’, in Foreign Affairs, July 1977.Google Scholar
  19. (19).
    Quoted in S.K. Mehrotra and P. Clawson, ‘Soviet economic relations with India and other Third World countries’, Economic and Political Weekly ( Bombay) Special Number, August 1979, p. 1368.Google Scholar
  20. (20).
    ibid. p. 1369.Google Scholar
  21. (21).
    Compiled by R. Sobhan, ‘The pattern of OPEC investments: the logic of redeployment’ (unpublished, to appear in Economic and Political Weekly (Bombay).Google Scholar
  22. (22).
    Based upon information contained in ‘The international deployment of OPEC’s gross investent with emphasis on the US; Economics Group, Chase Manhattan February and March 1979 and Bank of England Quarterly Bulletin, June 1979 (as quoted in Rehman Sobjan ibid.) and recomputed for our present purpose.Google Scholar

Copyright information

© The Vienna Institute for Comparative Economic Studies 1981

Authors and Affiliations

  • Amit Bhaduri
    • 1
  1. 1.Jawaharlal Nehru UniversityNew DelhiIndia

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