World Development Report 1984

TABLE 3.4
Current account balance and its financing in developing countries, 1983 and 1995
(billions of constant 1980 dollars)
All developing countries Low-income Asia
High Low High Low
case case case case
Item 1983a 1995 1995 1983' 1995 1995
Net exports of goods and nonfactor services -10.8 -69.5 -29.0 -8.9 -17.4 -14.0
Interest on medium- and long-term debt -48.7 -52.1 -58.0 -1.7 -3.1 -3.1
Official -9.7 -16.0 -17.5 -0.9 -2.4 -2.4
Private -39.0 -36.1 -40.5 -0.8 -0.7 -0.7
Current account balanceb -55.8 -109.5 -78.1 -1.3 -12.1 -9.3
Net official transfers 11.0 16.6 14.3 1.7 2.4 2.1
Medium- and long-term loansc 57.2 74.0 49.1 4.1 8.1 6.0
Official 17.5 35.0 26.6 3.9 7.3 5.8
Private 39.7 39.0 22.6 0.2 0.8 0.2
Debt outstanding and disbursed 592.0 914.9 656.2 47.5 89.6 67.9
As percentage of GNP 26.7 21.9 17.1 8.7 8.9 7.2
As percentage of exports 121.4 80.3 71.3 99.5 85.0 78.7
Debt service as percentage of exports 20.5 12.7 13.7 9.9 7.0 7.1
Note: The table is based on a sample of ninety developing countries. The GDP deflator for industrial countries was used to deflate all
items. Details may not add to totals because of rounding. Net exports plus interest does not equal the current account balance due to
omission of net workers' remittances, private transfers, and investment income. The current account balance not financed by official
transfers and loans is covered by direct foreign investment, other capital (including short-term credit and errors and omissions), and
changes in reserves. Ratios are calculated using current price data.
The major exporters of manufactures, already and investment needed to service loans on comaccounting
for 80 percent of the developing coun- mercial terms is particularly painful. Yet, provided
tries' exports of manufactures, would see their policies are reasonable, the returns to investment
manufactured exports grow at about 10 percent a in poor countries can be very large indeed. Conyear.
Some of them-such as the Philippines and cessional assistance is needed partly to finance the
Thailand-could do much better than others. development of human capital and to strengthen
Other middle-income oil importers would expand institutions-programs for which economic
their manufactured exports at about 9 percent a returns are high but delayed. Because the potential
year. Meanwhile, low-income Africa would have of the low-income countries will not be realized
its manufactured exports grow at about 9 percent a until these programs are in place, the role of conyear,
starting from a very low base (see Table 3.3). cessional aid in promoting development is vital.
To do this, however, it would have to reduce its Moreover, because the returns to these investreliance
on western European markets and to ments are high, aid can contribute significantly to
diversify its exports, expanding into manufactured development in the low-income countries and help
products. to raise the global efficiency of investment.
Under the High case, loan disbursements plus
The contrast between the Low and the High case
is not merely quantitative. It amounts to a qualitaofficial
transfers to developing countries would
rise from a peak of $83 billion in 1981 to $91 billion
tiedfrnc aswl,bauehe paety
tive difference as wetl, because the apparently
insurmountable obstacles of the past ten years
in 1995 (in constant 1980 dollars-see Table 3.4), a would steadily diminish if High-case growth were
rise in real terms of only 2.5 percent a year from achieved-or, under the Low case, would become
1983-slower than the projected rate of growth of even more entrenched. With a continuation of
industrial countries. eve moeetece.Wt. otnaino
slow growth, millions of people in many develop-
Low-income countries would also obtain a grow- ing countries will become progressively poorer;
ing inflow of capital in the High case, largely with faster growth, almost everybody in the world
through the expansion of concessional loans from will enjoy some increase in real income. The prize
governments and international institutions. With that the High case offers is considerable. The queslow
income levels, the sacrifice of consumption tion is how to win it.
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