UNITED NATIONS
\ ECONOMIC AND SOCIAL COUNCIL
Distr, LIMITED
e/cn.14/ama/uo
16 August 1979
Original: FRMCH/ENGLirr
ECONOMIC' CCMST1SSION FO;t AFRICA
ASSOCIATION OF AFRICAN CENTRAL BANKS Sixth.Regular Meeting
Dakar, (Senegal) 27-31 August 1979
INTERNATIONAL FINANCIAL AKD MONETARY PROBLEMS AND RELATED RATTERS:
IMPLICATIONS FOH AFRICAN COUNTRIES AND CONSIDERATION OF RECENT
DWELOFMEtfTS IN RESPECT OF THESE PROBLEMSTABLE OF CONTENTS
INTRODUCTION
I. TRENDS IN G30SS DOMESTIC PHODUCT (GDP)
II9 'RECMT DHTiiOFMENT REGARDING THE a^ANSPER OF
FINANCIAL RESOURCES AND THEIR B1PLICATIONS FOR AFRICAN COUNTRIES
IIIc KEVELOFMENT3 IK THE INTERNATIONAL MONETARY SYSTEM
AND IMPLICATIONS FOR AFRICAN COUNTRIES17. MONETARY AND FINANCIAL CO-OPERATION AMONG DEVELOPING
COUNTRIES
CONCLUSIONS
ANNEX: LIST OF TABLES
Paragraphs
1 2-12
13 - 41
1 1-2
2-10
42 - 57 11 - 15
58 - 84 15 - 22 85 - 94 23 - 24
:79-2285
;/cn.h/aiia/iio
INTRODUCTION
1# This paper attempts to reviexf soeig of the r,iost significant recent economic trends in the region rnd the najor developments that have taken place in the international and monetary fields since the last nccting of the Association of African Central Banks.
1. TRENDS IN GROSS DOIESTTC PRODUCT (GDP)
2. During.the period 1.960-1975, ODP.of.all African countries registered an average annual growth rate of 4.0 per cent. From 1975-1970, t§^, growth rate rose to 5.7 per cent^ oiti.ng - primarily. ,to the..faster pa-c©. of econoraic" growth in the raajor oil- cxporting countries, GDP in this.group .o$\ppuntric$ .in fact registered an average annual .growth rate of over 7 per cent in the' iadt'decadeV whilst' in non^oil^xportin^
countries the GDP growth rate reached only 3.9 per cent during this period, and fell to 3.5 por cent during the ycn.ro 1970-1977. ' ... - 3. Africa has thus failed to achieve the target of r.n average annual rate of growth of OOP of o per cent set for the First and Cccond United Nations Development Decades.
4. The sectoral target of 4 per cent set for agriculture has not been achieved
either because the average annual rate of growth in value added to CDP by agriculture, forestries and fishing reached only 1.9 per cent in the 1970s as against 2.4 racr.'cent
in the 1960s.
5. The came can be said for the Manufacturing industry which, against a target of
u per cent, had an average annual rate of growth in value added to GDP of only 6.1 ?cr cent in the 1960s and 5-7 per cent in 19?S and 1977. - ■ *
Intra-African trade6, "The commodity boom" of 1974 led to exceptional growth of trade among African '
countries in value terras, but most of the resultant increase was due to price rises.
The chare of intra-African trade in total trade of African countries, in fact, was"
reduced even in that year from- 5.1 per cent in 1973 to 4-4 per cent.
7. In 1977 intra-African trade amounted to about $2 billion and its share in the
total trade of African countries had ranged during recent years between 4-5 per cent.
It compares poorly with about 20 per cent share of Latin American intra-tradc and about 19 per cent of intra-Asian trade in relation to their total trade.'
Trends in external trade
6. Africa's external trade has suffered a groat deal from the effects of monetary
rasruptions and the relatively sluggish recovery froo a prolonged recession x/hich have characterized the economy of the majority of the 02CD countries. The eomnodity
boon of 1974 brought the total exports of independent African countries to $39.3 billion.
In 1975, exports fell to $34 billion, but reached $42.5 billion in 1976. According to the latest available infonaation, total export receipts of independent African "
^ f1^rValUG tQVm Wcre U6'5 billion in 1977- During the whole period between
i.J/3 and ljJ/O, exports in volume terms had decreased continuously.
9, TI>c price trend of .najor African export coiaagditics as compared uith those of nanufactured goods exported by developed countries illustrates, to a lar-e extent,
the situation during the period 1974-197-3. °
E/CN.H/AIiA/HO
PIage ^
10. In exar.ii.nirr; the prices indicated on teblc 3 of Annex one should bear in mind that the so-called coomodity boom of 1974 resulted pn.rticials.rly from high price increases for petroleum, sugar, phosphate rock, oil' Seeds and oils and somewhat smaller price increases for cocoa and.non-ferrous ores as in that year the price increases for the above commodities exceeded those for r.ianufacturcd goods exported
by developed countries. During the last five years (1974—1973) as aay be noted from the table, oost of the coiawoditics exported by African countries (except coffee, tea, cocoa and hides and sitins), cUd not:keep'pace with the steady incrc?.sc in prices for
raanufacturcd goods exported by the developed countries.' As a rule, prices of commodities exported by African countries were subject to exceptionally sharp price fluctuations*
The outstanding cxaciples of sharp falls in prices were sugar, sisal, non—ferrous ores and roctals, where, export receipts often fell greatly below the production costs. Related
falls in export volumes wero one of the major caaeee for aggravated trade and balance'
of payments difficulties faced by many African countries*
Trade deficit '. '
i ■ ■ ■
11« 1974 was the last year in which a high trade surplus was realised by African
countries in their trade with the outside world, i.e. about Oil'-"billion'wore made
available to^inancc their imports and other forms of expenditure. In 1975 the
situation .worsened to a large extent, when a trade deficit of $5 billion was accumulated, A trade surplus of about $3«2 billion was achieved in 1976, but a deficit of $2.5
billion was sustained in 1977i
12. ,. Among the oil—exporting African countries, Libya is the only one to continue maintaining considerable trade surpluses, which in 1977 amounted to $4*7 billion as compared to .15• 2 billion in 1976 and to $2«5 billion in 1975* Eue to development efforts, the trade deficit of Algeria in 1977 was $1.2 billion as compared -:to a - deficit of 0,1 in 1975. Nigeria's trade surplus in 1977 wao reduced to £0*4 billion as compared to about 0l»2 billion in 197^» The only other African country which achieved a considerable trade surplus during the last tiro years was Ivory Coast, while iiprocco was on the side of sharp deficits. In the main, deficits were financed by external resources including various drawings on the I12T and other financial
institutions.
II. RECENT -DEVELOP! 3HTS REGARDING TIE TRANSFER OF FINANCIAL RESOURCE AHD THEIR
II PLICATEONS FOR' AFRICAN' COUNTRIES. . . .;
Development assistance Over-all data
13» The net inflow of. resourcec into Africa increased from 6,9 billion United States dollars in 1974 to 14»7' billion dollars iti 1977^ giving an average annual growth rate
of £0.7^ per cent at cuprent 'prices, ■ '
14» Novortliclcss,-despite an average annual increase in ODA of -i5*5 per cent at
constant 1970 prices, the cliare of, ODA in the total flow of resources to African"
countries has dropped froa 62 per cent in 1974 to 53 per cent in I977»
Data by ,'youps of countries
15« Trends in the voluno of inputs from countries ncrabers of DAG, OPI5C"find the
Socialist countries,
DAG countries ;
(a) Public sector
16. The total flow of resources to -African countries by DAG countries and multilateral
institutions rose appreciably between 1974 and 1977 • At constant 1970 prices, the sura
rose froa 4.17 billion dollars in 1974 to 7-^9 billion dollars in 1977, giving an
average annual rate of growth of 20.5 per cent, . .'..-.'
,7* . .Out ojf the total received by Africa, the share of resources froa DAO countries
and.Multilateral, institutions to non-oil-r-exporting countries under the heading of ODA
increased ...from 92.4. per cent in 1974 to: 96.G per cent in 1977. "The rate of growth ':in the: resources going to non-oil-producing African countries averaged lo,3 per cent
at constant 1970 prices during the-period 1972-1977.
18. Nevertheless, the nain oil—exporting African countries also received a greater
anount of resources. Total resources to oil-exporting countries rose from 36l milliondollars in 1974 to C72 raL^lion dollars in 1977, The increase wac largely due to a
rapid growth in the share of private capital which, in 1977, represented 93 per cent of their total resources.(b) Euro-lending by banking'1 syndica
toi19» The amounts borrowed in the fora of credits in rSurc—currcncy in 1977 reached 34«1 billion dollars, a 1° per cent increase over the 1970 amount• Of this total, 59 per cent went to developing countries. Loans contracted by those countries in Euro-currency in 1977 increased by 2.9 billion dollars, or 17 per cent over 1976.
The greatest share of this an'bunt uv.s borroued by oil—exporting countries which, with
e. surplus of capital,, borrowed -l.C billion dollars in 1977 as against 200 billion in 1976. For the first time, Liberia and Mauritius took out iXuro-currency loans fron banking syndicates, Ix>rrouing 30 uillion dollars and 37'million dollars respectively.
20. The naturity of liuro-lo^Jis fieV; longer in 1977. Over half of ouch loans (65 per
cent) were for an initial duration of over five to seven years. In 1976, only 39 per
cent of the loans ucre of such length, I,bprt of the loans (49 per cent) had an initial duration of three to five years. .
OPSG members
ZU According to the statistics prepared by the UIJCTAD secretariat, suns paid out ■ by OPEC newborn to African countries amounted, to 3.7 billion dollars in 1975 and
nearly 2 billion dollars in 1970, representing a drop of 46 per cent.
ft /no
Cocialist countrioc
22. Socialist aid pro^ramcs, including that of China, arc aliaost without cxceotion *
oilateral prorrra;jnqs. . , , ■ '
23. In recent years, (development assistance frora the Cocialist countries of Rpotern Europe has gradually changed direction, to emphasize creating coraoleracntaritiae in the prorluction structure and promoting exports uhich night fine1 outlets in the
Cocialist countries themselves,
24. ■ C3orunitLTonte ontcrod into by. China usually provide for long-term interest-
free loans.:. : ° '. '
Currcni:_i balanco-of-payiaonts . '-..■:
?5v,AG.cordinG to- cBtitv-.tco by the SCA secretariat, concerning the balancc-of«.payiaonts
Sicuation;of the various 2**9UpG of countries, the extremely lar^c surpluo of the OPTIC countries ca^o:dqun frow 51.25 billion dollars in 1974 to an estimated 19 "billion in:
197o am the deficit of QHCD countries .'lilceirioc fell iron 32,/,. to 17 billion dollars
during the sai.ic period. For non-oil-producing developing countries, houovef. the deficit
^roij worse, rising fron PJ>. billion dollars in 1974 to 30 billion in 1973.
Table A s Current balancc-Qf-pay:.icnto by ^roup of countries, 1970 and " '' ' ('"jillionG of United Ctatcs dollars)
Iroup of countries " —— 1970 1974 ■ 1975 1975 . 1977
32 -17
34 ' ■ 19
Non—oil producing ■ '
* -j ■ ■"■'■»■
c.evelopin- countries ^fir Lpf, _?o-- p^
Source: O2GD 3c6itoi.tic Outlook, Ho. -3, 1373 (Paris) a/ Porccaev
26. The folldwinG cstiix.tes by the EGA secretariat for the non-oil-procucin-r developing countries in ^rica reflect r. similar trend to that sho-m for Plf non-oil-prociucinc developing countries in the T-rorld scene except tliat the deficit on current account in 1974 for these African countries did not rise as sharply '"
as ttiat for all non-oil-producing dovelopin- countries. The cowipariEon of the
current account deficits for these t;ro groups of countries is as follouo.
N. 14/AM/l/llO
Page 5
Current account: (1)11110113 of United States dollars)
"Jorld non-oil producing developing countries African non-oil-producing
developing- countries
1914 1211 ■ 2276 1277
-0,8
-24
-200 -6.6 -5,0 -5-2
Table B : Balance of payments of developing Africa,
(millions of United Gtates Dollars)
1970 and 1974 - 19771970 19.74 1975 1976 1977
jor oil exporters Goods and services (net) Private transfers (net) Government transfers (net) Capital (net)
Reserves and related items Hrrors and ommis^ions
Other developing countries a/
Cfoods and services (net) Private transfers (net) Government transfers (net) Capital (net)
Reserves and related items Errors and omissions
3 7 443
218 129 -46 -483562 -6
-714 -7 261
-23 178
-1 594 -4 640 -228
990 1 232
-314
-86100 2 546 2 187 -43 -151
■1 723 ' 1 015 -240
249 244 109
-155 -120 -119
329 578 627
1 650 -1 275 -218V
-345 -442 -159-9 889 -7 963 -7 828
458 538 441
2 783 2 325 2 198 4 455 A 358 5 935 2 -284b/ -829t/ -909 -91" -87" -I64
Source: Based on data in HIP, International Financial Statistics vol XXX
Jo. 12, December 1977 and vol. XXXI, V,oB 9, September 1978, but Includes- r$&* >:
estimates for countries and years not covered,, . , ... , . ■ , ■•.
a/ -Ten countries are not directly'covered by available data and--estimates
have been added for siich" countries-, ' " " '" ' ' .... ■
b/ Includes1 .dr-awing' oil W?:, ' *." Vl ; ■ " ' ' .■ ■ ■ ' .
Zl. Per the other developing countries in Africa based on less reliable statistical
series the large deficit on goods-and-services account in all the years given in the table was more than covered in 1970, 1974 and 1977 ty net transfer receipts '
(especially on government account) and.an.increasing net capital inflow;-'Heserves *"
increased in 1970, +1974 a^d l?77.-but: in" 1975 ?nd 1976 th^re .were some substantial ■'■
calls on E.iP credit and other fmancir.l sources ro "that increased liabilities Were ■•
incurred^ central banks and.-;in many oases reserves were also" reduced,- " ■
Page 6
-°»
«oThe total net inflow of resources to non-oil-producing developing countries in Africa from transfer (aid) receipts to Governments and capital movements (excluding calls on Ills? cre.dit) .were 0U^2.2 billion in 1970, 3UG4.7 billion inl974, 3US7.2 billion in 197% 0U36-7 billion in 1976 and 3U38.1 billion in 1977. Unfortunately, in 1977 there was a much higher percentage of this external resource flow.coming- from capital rather than from aid. The proportion from the net capital inflow was 71,2 per cent in 1977 compared with 46,2 per cent in 1974 and 55.4 per cent in
1970.
?S
Stabilization programmes were adopted by some 20 African countries in 1977,
mostly in connexion with use of 22iF Trust Fund resources* adjustment measure helped to hold down the aggregate trade deficit for the area. This achievement, however, was,, offset .to- some--ex-tent- by an increase~irf net: payments for external servicel*30. Despite the predominance of enlarged current .aaci).unt. deficits-of-the African
non-oil-producing countries, their total international reserves rose as receipts from capital inflows and official transfers exceeded the current account deficit
in 1977* However, the foreign borrowing required raised their external debt
substantially. External debt levels continued to be troublesome in a number ofcase
31* For 1978, sustained or rising economic activity in the low-income countries
of Africa, supported by rising ptiblic sector investments, appears to have resulted in a further expansion of imports but there was little or no gain from higher ex ports as price trends for African export commodities with certain.-exceptions have,-
on the whole, been unfavourable. The implications are that the balanoe-of-payments
current account for the region as a whole is likely to have worsened compared with1977* The fall in international reserves appears on the evidence available up to and including 1978 to have "been incurred mainly by the group of major oil-exporting
countries whicf. suffered to some extent from lower world lemand for crude petroleum However-, the receipt of a higher inflow of capital in these countries a2id higher resource inflows in other developing countries appears to have enabled the over all payments situation, to be- contained* - - - - -international reserves
32. As can be seen from Table C, total international reserves of 35 African countries for which statistics are available, went from nearly 6 billion dollars an 1972 to 15 billion in 1S77 and 12.6 billion in 1978, or an annual average
^o <V?SSaSe °f Z°*5 per cent between !972 and 1977 and H.5 per cent between
xy/d and 197b. During the period under review, however, the accumulation of reserves continued to show an uneven distribution. Oil-exporting countries accounted for 73 per cent of the total in 1S77 and 66 per cent in 1978.
Debt problems
(a) Trends
2™ f°r 1?w-income erouP of developing countries i.e. those with a per capita
GNP of \>IEl6q and below in 1975, the rate of growth of debt from 1970 to" 19% '
according to UNCTAD was 13.2 per cent a year. At the other extreme, the out-
standing debt of countries with per capita GNP of CTB801 and more in 1975 grew
by 21.2 per cent a year between 1973 and 1973.
Tablect International Reserves
E/CN.U/AMA/llO
Page 7Algeria Benin Burundi
Central African
EmpireChad Congo
thiopia abcu
Ivory Coast Kenya
Liberia Libyan /;rab
Jamahirya fe-dagascar lalaui
iauritania iauritius Morocco
iger
"igeria wanda enegal ierra Leone omalia udan Togo
^unisia Volta nited Republic
of Cameroon hxted Republic of
Tanzania aire ambia
493 ■28.4 18.51
. 10.081.71 10.33 -92.613923.23 11.39
107.4
87.2 202.0
29.25 52.2
36.23
3.8 70.1
13.5 237 41.4 376
38.5 6.37 31.4 46.5
35.636.5 222.7
47.5
143
33.1 21.731.78
7.86 1.47 363
47.86 16O24
189.088.4
233.0
21.27
67.9 66.64
4.2 42.2 266
66.8
50.8
583 I5a£
12.0 51.8
61.3
35-137.9
307.262.6
43.64 51*15
119.6178.4
166.0144.6 234.6
193.9
1 689 34.7 14.53
1.74
15.2724.09 356 - 275.4
103.30
28.04
93.865.7 193.3 13.63 36.16 81.79 49.4
6.1 103.8 131.1
417 45.5 5 626
12,96 54.6
6.3- 124.3 42.4 418.3 54.4
Q3.6 78.53
50.2 140.2 171.6
l 353 15.0
30.59
3.82
13.823.06287.9 294 146.07
28.55 149.9
102.8173.4
13.9221.95
35.661.46
4.2 166.0
47.7 377 609 50.3
25.59
31.128.4 36.4 68.5
41.2
385.2 76.5 28.83 58.56 65.4 148,9
1 987
19.2 49.08
18.83 23,28
12.16305.9 339
116.15 20.63
104.276*5 275.5 17.17
32.06 42.226.22
82.06.9 491 89.5
82.5
203
64.28
25.2
25.3
85.0 23.666.6
371.0
71.5
43.80112,3
60.85
99.6l 917
94.7820.6
25.59
19.0313.77 534
225.210.17 24,39 162*3 185.7 523.3 27.34 48.91 88.03 68.9
6.250.3 66.7
532
101.4 259 82.87
34.3 33.4
120.5 23.246.4 357.5
56.5 43.03°
281.8 144.92 73.5
2 233
81.73 15.9
24.57
12.18
605 9.82 165.9
23.01
26.07 286.9 449.5 355.9 18.02 42.16 78.10
59.2 79.99.5 649 47.3 128.7
• 917
87.6
34.819.8 126.828.4 70.4 450.3,:
36.6
52.97
. *.
139.79 56.2
Total
5 952.79 6 742.61 14 222.52 12 156.67 13 642.95 15 144.62 12 595.80 TOrlati™ 789.82 S 269.79 -Z 065.91 1 486.28 1 501.67 -2 548.82
International Financial Staticn,. Vol. XXXII, No. 5, May 1979.
E/CN.U/AM/V/ilO
Page c
34* For the group of countries between these tvjo limits, the annual debt growth rates rose by 25« 1 per cent a year for countries with 0US161 to .-5US3OO per head, 18.1 per cent for SU33O1 to OUS45O per head and 22.8 per cent a year for countries
Table D : Outstanding public debt and debt service payments of developing
vsrs-r; 1970 and 19T3-1973~'tT3illi'ons"~6f United' States~doilars)
1970-. 1973 .1974 1975 1976
Africa - , ... , \'\\ .
Debt.outstanding':^ including uiidisbursea) 13,28:.,.24-45 31-31. 4U08 49-15 Debt, outstanding: (diabursed only) - ■ . .,. 9.02' 15»69 18,88'. 24.44 30.02 service1' '■ . [- 0.89 2..19 2.43' 2.56 3.03 ,r(percentage) ■■ V ■. , ,■'■•■ 9,9 . 14.'0 12.9- 10*5 10.0
debt
Debt'Outstanding (disbursed only) * 2.39 5-71 7-06 9-24 12*08
Total debt service '■■■"■ . * 0.41 0.98 1,5'1 1«40 1.83 Ratio., (percentage) """ 17-2 17,2 21.4 15-2 15-1
Host . riously affected a/ ■ «' .
Debt outstanding- (disbursed 'only) 17.36 2£5O 28.60 33.86 39»22
Total debt service ■ / 1.34 2.01 2.13 ; 2,^2 2O79
Least- developed countries b/
Debt outstanding.
Total debt service .
Ratio:/ (percentage)
20 OV 5-
57 15 G
4*0.
5.
42 24 4
6.
0a 4.
1428'
6
7- Oa 4.
53
8
9-
0.
4.
02 41
5 Source:' UITCTAD secretariat based on data supplied by the r.Jorld Banlc,
a/ Countries most seriously affected by world economic changes this decade, b/ .Out of 25, countries covered, 19 are in Africa. ^ !-■
35«. The total disbursed debt outstanding of the African countries as a whole rose from 0US9 billion in 1970 to 0US3O billion in 1976, an average annual' ';
growth ,rate of 2.2. .par cent*- i?or the 25 .least developed couhtries in the world1
it ros^ from 0U32V& billion to 0US9 billion or by .23 per cent yearly*
(b) Structure
E/CN.U/AMft/llp
Page 9African countries south of the Sahara,: where "the '■' per-■capita -income* is very 16wt did not resort much to private "borrowing. New pUbHc'"dWbt6-:amounted to 2,6 bill!or. dollars'in 1976 or a 10 per cent increase over 1975« The total undisbursed public debt of Africa south of the Sahara'"' at the end of 1976 was 13-9 "billion dollars.. Most of it had been contracted on particularly favourable terms. The total disbursed debt outstanding1 owed to private sources amcauvted to 04«6 billion at the end of 1976, or 24 percent
i'ma^*&Zi^J$$J^%V^Fovr. counir"4e.s.- the.. Ivory Coas.t,-"tii&". r3udan^::;£aireii.and/.■ ...'..
:"S^ba'a,'A.ajC'GOunted--f6r 69-per .cent .'of' this amount.. ;::.'Bx i$76t'\ theJ.fo.tal public debt outstanding of Algeria, Egypt, Ilorocco and. Tunisia:'was. £4*1-■Million
dollars,
...3Z»- ,..In-JL97£-the .bilateral public.debt of these four, countries.-.. -.
nose to ;10.7 billion dollars or to 43 ^>er cent of outstanding external public debt.
(c),. -Debt servicing ■ . • ■ --. ..,_....!
38. An .analysis■'by UITGT/ID of the debt outstanding and debt. seryice: payments by -groups .of developing coi^ntries chows that 40 countries in Africa inc^eaee.d their
'taiai,disbursed, debt from. #US9 billion in 1970 to 3U3 30 billion in 1976 and
'their debt service payments from GUS0.9 billion to £US3 billion*' These: figures may-be compared, with-merchandise export earnings in 1976 of approximately !j)US40 million and for 1970 of about 0U812 million,, However, the ratio of debt service
payments to merchandise export earnings appears to have stayed the same comparing
1970 and 1976. , , , r , . . ■
39« Talcing -.ill. world developing countries for which d^ta were .than, available I3HCTAD estimated' that total debt-service payments of these countries increased from &J35.8 billion in 1970 to 5US17.1 billion in 1976, The changing composition i)f" debt Ea.s""had"some" influence on debt-service payments particularly .as; in more
recent ye'ars the're has been as increasing share of debt oWecV to 'private1'" lenders.
"In' I976" interest payments' were' 36.5' P3^ cent of total'debt service payments
compared with 30 per cent in 1970= ^or the African region interest payments v;ere one third of debt' service payments :iSa.-.1976- apropared ,;wi-th. 2.8'Jier Gent \iii'
1970o For 1977 early estimate's by ODOD shov;" that' the total debt services of all developing countries had risen to .OUS36.6 billion or by 17 per cent compared with 1976O The average increase 1970 to 1977 was 22O2 per cent a year and in 1977 interest payments totalled $US13.2 billion and amortization
4 billion.
4C. The unsatisfactory situation that arose in 1973t when the ratio of debt
service to total debt outstanding of African countries rose to 14 per cent showed some improvement by 1976, falling to 10 per cent. These rates were higherthan they would otherwise have been because of the relatively high proportion of public debt financed by private sources including suppliers' credits- J?or private debt the ratio of debt service to total outstanding debt was 21.4 per cent in 1974 and 15.1 per cent in 1976O In 1977 based on data in table this proportion was 19-9 per centa
E/CN.14/AMA/110, Page 10
41. Fortunately -Hie least developed countries were able to benefit from low- interest government and multilateral loans so that their debt service ratio
as a proportion of debt outstanding was 5.8 per cent in 1970. According to
OSCD the least developed countries owed &IE12.1 billion in 1977 and the debt services ratio was 5 per cent of the total debt outstanding.Table Es Total disbursed debt of all world developing countries at year end and . total annual debt service by type of debt, 1973 and 1974-1977 (billions
of Tfaited States dollars)
Debt 1970
1974 1975 1976 1977
Bilateral and multilateral Export credits
Other (market terms)
Unallocated
Total debt
Debt service
Bilateral and multilateral Export credits
Other (market firms)
Unallocated
Total debt service
35.0 26.1 12.1 0.9
9.0
55.0 39.2 44.8 1.0
65.5 49.3 59.5
1.074.2 57.5
79.4
1.1
20.3 25.2 31.3
85.3
66.0 91.6 l.l74.1
2.2
4.9
1.80.1
139.9
9.2
3.4 7.5
0o2
175.3
4.0
11.3 9.7
O.2
212.2
13.4 4.5
13.2 0.2
244.0
5.0 16.2
* 15.2
0.2
36.6
Source; OECD, Development Co-operation, 1978 Review, (Paris? 1978),
Pape 11
III* DEVEIOPMEtfTS IN THE INTERNATIONAL MONETARY SYSTEM AND IMPLICATIONS
42« The Second Amendment of the Fund's Articles of Agreement entered iigto force on 1 April 1^/8© :Rie amendment- constitutes a compromise between the diffe
rent and contradicting views within the Fundvs policy-making bodies* Deye*- ,o.1 loping countries, in particular ^ used to hold views differing from those < &y of most of the developed countries in course of the lengthy negotiating
process,, Consequently„ most of the developing countries still; hold the ; : view that the results of the reformed system need to be changed in such - a way as to conform with a more rational and objective, international
monetary systen0 Ihusj these countries maintain that they still suffer
greatly from the drawbacks of the reformedsystem» BDweyer3 the main , •-■■;-.;■;
current monetary problems of African and other developing countries are
discussed briefly in the following paragraphc ■..-■,■ ;.i<;<""
Balance-of-Payments Financings Conditional!ty and Surveillance over Inter national Monetary Systei.
43« Three important aspects of the monetary problems could be emphasized!
Provision of adequate short and nid~tern balance-of^payments financing by the IMF, loosening anc!? in some cases, elimination of conditional!ty attached to the use of Fund resources^ and exercise of surveillance over the inter national nonetary systeRio With regard to IMF balance~of-^)avments financ ing the scale of Fund lending capability and the range of its financing programmes should be enhanced still further by? for instance- another
increase in quotas; hence^ work on the seventh quota increase in the region of 100 per cent should be started immediatelyg preferably early in I98O
instead of 198l0 AIso9 though the supplementary financing facility recently
had entered into force with initial resources of nearly SDR 8 billion, yet even this comparatively large amount is not adequate in view of the magnitude of balance~of—payments financing heeds of the deve3.oping worldo
44- With rc::pect to the range of financing progrannes^ it is also observed
that the IMP has in recent years given attention to the expansion and improve*.-' nent of its borrowing arrangements such as the creation of the extended Fund i , facility^ a long-term financing arrangement j the Orust Fundf which prosifies,»^«
practically non-interest-bearing loans to low—income developing countries based on the profits frora the sale of goldj and the liberalization of the :
compensatory financing faciiitya : ■
45. The last facility is of special importance to African and other dever-.
loping countrieso During the last three years this facility had covered ■ ■ "■,;■
about 50 per cent of the export shortfalls of the developing countries and"' provided some SDR 2 billion in loans© The facility in question needs to ; be liberalized still further in order to conform with the genuine needs I ■ ,.
of African and other developing countries,, Ihe level of financing it : ■;■■ \ provides still falls short of the needs in this respect? taking account of
the current sharp fluctuations in export earnings of this group of countries.
E/CN.U/AMA/110
Pap© 12
Thus, further improvement of the functioning of this facility is ■urgently'
needed. Also, although the buffer stock of financing facility has not so far been much used, an enlargement of its use taay be required in the future owing to the fact that the number and scope of eoraaodity agreement's lenderUNGTAI^s-general programme in this field raay increase*,
46# Furthermore, the application of conditionalityB according to the Ftuid?
to based oh the premise that it is not in the interest of any cc:~try'~* and
ultimately nbt feasible — to incur payments deficits over a protracted period of time which cannot be sustained by capital inflow^ ioeo hence the need for'corrective policy action. Of course,, no developing country can object to this in principle; objection could only be directed against the application of the principle, 3h some cases prescribed conditions hamper, rather than'assist, development and econonic growth in African and other developing countries. Also, there are circumstances in which the
application of credit tranche conditionalify would not bo appropriate^ 3h
this connexion, the industrial countries should co-operate by maiding moreefforts-to£§ase tbe^external problems facing the de^iraloping countries* . Furthermore, the Fund should take into account the domestic political/.and
social objectives of its members, as well as their economic priorities^ConditiCnality, as applied by the Rind, should alno alien xor varying speeds of adjustment with respect to the different"vGuatrlf.i *ad conse quently programme durations should be"lengthenedf particular-!v in cases where policy shifts of a structural nature are involved,. In. this respect, it is observed > that the extended Fund facility corers" pro.7f/'S£>r- l?s-i;:Lng up to three years} and that stand-tiy arrangements frequently extend beyond
the traditional one—year period. Also^ 'repayment-periods? rtoniKiily .limited to three to five years under nost Fund facilities, may^, •. und.ar certain
important special circumstances, extend to seven or eight years in the caser of the supplementary financing and extended Fund f^oilitieo a;id;, indeed^
to ten years in the case of the Trust Fundo Altboi^'h - j I thece"measures could assist these countries to a large extent? yet a great deal heads to
be done to meet the ^argent needs of development and economic ^rovfeh, related structural changes and duration of the adjustment :ro3p«r.(,47. Another related issue is surveillance over the ■Sj.'-c^rRationai nonotary
system* ■ Jfovements in exchange rates, under floating condition;, have? caused
ft^fttablioih:; effects Suiting the last few yearso Uiider ^ c;lreac3tances2the Fund,-though its annual consultations and the oxerc;!so. of surveillance :
should impartially monitor the exchange policies of it,j nsubers co as to avoid disorder or competitive manipulation of rateoo In i-'iio conne;:ion?
it seer;s that it is incumbent on the BYmd to develop ar.d define a concerted
growth strategy for industrialized countriese Such o. o±^e^o:rr'Is necessary
if the size of balanee-<>f-^jayiiients surpluses anc! deficit •'!_£ *.:o bo rodizfced
and if the assodiated deflationary and inflationary cha^u re£.3-cionrt'are to
be broken* Both nurveillance aiicrtho strategy indicated ahovs should be
rigorously and strictly exercised and adhered to rc^poctivel^' by both the Fund and its member countries. 'E/CN,U/AMA/llO Pare 13
Role of the SER
48, Developing member countries of the Fund have repeatedly emphasised
their urgent heed for making"the SER the nain international reserve asset*
However, this objective has not yet been atfeiriecU On the other, hand;
the latest SER allocation, though *:elcbne in itself, yet indicates tiat the creation of en adequate level of international liquidity is not foreseeable in the coning few years* The question of a substitution account is still
in the stage of study and negotiation,: ; .
49« Nevertheless,"the use of the SDR as the standard of value for, the
Fund has caused the SER to emerge as a standard of international value, Thie has also led to developments that have placed the SDR on a course to ; becoming the general standard of international value. This tendency is reflected in the fact that in different treaties and arrangements, different?
standards of value nay be used, but a-convergence towards a single stan-r. <
dard in broadly based international^agreements constitutes an evidence to the emergence of a general international standard as a matter of customary practice. Today, the focus is on the SDR as a novel financial technique developed by the Fund as a result of the recent changes in the international:
monetary system* Consequently, this general standard is currently more or less accepted in most agreements of a financial nature, Ifcnrever, though . still modest these developments of the SDR as a standard of value, yet
they are in the right direction but need to be encouraged and developed : still further* ■
50o On the other hand, the SER has not yet become the principal reserve .
instrument of the international monetary system. The primary fora of the SCR is that of an international reserve asset that is allocated by the Fund- to its members and can be used only among official entitieso About , SER 13*3 billion was outstanding in this form in May 1C79, planned to be. : increased to about SER 21,3 billion by 1 January 1981 according, to acurrent decision of the Fund to resume allocating SERs.
5lo 2h addition to the SDR as an asaet as indicated above, there are assets denominated in terms of the SER in a Volume greater than, the outstanding "
amount of SERs mentioned above, ■ As the ;SDR is the unit of account-of the Fund ifii" terms of which the value of the Fundrs quotas are expressed^ and
the Fund*s assets^ and liabilities are maintained, the Fund's financial
activities could expand the use of the SDR as a standard of value ininternational monetary and financial relationships© Beyond the Fund, other international financial institutions, such as the World Bankj the;fflricari Development Bank, the Asian Development Bank, the International Fund for Agricultural Development, the Nordic Investment Bank and a number of -
clearing and payments institutions in. Asia and Latin America are using :- ■
the SW. as their unit of account; and the SER has been adopted, or isbeing considered for adoption, as the unit of account under numerous treaties dealing with activities such as international transportation in a variety of forms, telecommunications and postal services, financial operations and products liability,, Private uses of the SW. ay a unit of account are also expanding* Neverthelessm a host of outstanding problems sti .11 exist and
E/CN.U/AMA/llO Pare II
need to be overcome before the SDR is fully established in the international
monetary system. r
F7. A nur.bcr of issues has not yet been resolved. For instance, there
is a need to raise the SDR interest rate so as to i.iake this instruraent amore attractive and competitive reserve asset and to widen its use; also the question of the substitution needs to be considered more carefully and
resolved as soon as could'be possible, -! ' :
5?, Furthermore, the vital issue of allocate? anL adequate abount of SDRs for development purposes in the developing countries still remains ■
to be considered and resolved as alluded to above; the latest allocation of SDRs does noteonforrc with expectations in this connexion, A further allocation will not ultimately add to the current inflationary pressure as some; quarters claim, 3h fact international liquidity, increased in this uay, would result in a Ezmre appropriate distribution of reserves.Also, it night help to increase SDR allocations for development' purposes if the SDR is made the main reserve asset. The increase in question snould
be of an adequate level and for a number of years»The Adjustment Process ...
54. Under the Second Ancnduicnt of the Fund's Articles of Agreement each member country undertakes to collaborate.with the Fund and other members to assure orderly exchange arrangements and to promote a stable system of exchange rates,, The Articles emphasize that stability at the national
level is a necessary condition for a stable international monetary system and, subject to qualifications, each member agrees to foster orderly economic growth with reasonable price stability,, . ' ,
re. While efforts have ':eeh hxul are -;einjf nacle to achieve greater stabi lity, there ie still a significant difference bet?:een the objectives of the amended Articles and the state of the world economy,, The size of the exdiange rate movements in recent years has nevertheless created diffi culties for Fund members, particularly the majority of African and other developing countries* As night be expected, Fund members have differing views on the benefits of exchange'rate flexibility, Msst of the develop-*
ing countries, including African c6untries, that'peg their exchange rates to some currency or a combination of currencies do not share the attitude of some of the larger industrial countries towards floating. Tne former category of countries still prefers fixed but adjustable exchange rates
as it more or less provides then with a substantial measure of stability in the value of their foreign exchange reserves and in, trade exchanges, while the industrialized countries tend to prefer floating,, However, the short—run fluctuations in exchange rates in recent years have caused
problems for African and other developing countries despite the fact that
most of then continue to peg their exchange rates. For those AfricanE/CN.1/./AMA/110 Pare lr
countries that peg to a single currency.greater exchange,rate variability between the intervention currency and other currencies is likely to result in an increased.variability in both the country's effective exchange rate and in the local'currency price of its -imports and exports* Increased shbrtwrun fluctuations among the major currencies also nay nean tha^ a -developing country's exchange .rate responds to factors more closely asso
ciated with the external position of'. the country issuing; its intervention currency, than to its own domestic or balarice<-of-payments heedsi; 3h brief,
the choice of an- appropriate peg has become a difficult one for develop ing countries in today5 s exchange rate environment,* Increased exchange rate fluctuations has also caused problems of portfolio management for
=. developing countries, most of which hold nearly all of their f6reign ex change reserves in a single currency,, ) Also, fluctuations in exchange rates have diminished <the store-^ofrvalue function of some of the major currencies; and the rise and variability in import costs have led to a
demand for higher and more assured levels of reserves* Developing countries that peg to a.single currency whose future value is uncertain nay there fore-face. the. dilemma that they need.to:hold larger working balances in
that currency, yet they may also wish to diversify their reserves*
*£,: -Fu^therrncare, most African countries, along with the majority of
developing countries, are expected to suffer a-great deal from the recent tendency towards protectionism by developed countries; from drought; from the declining trend in;^primary?commodity prices and worsening terms of trade; and fronjafurther ■lowering of the levels of foreign exchange reserves,. Thus, these and the problems indicated above pose an extremely difficult situation with respect to African and other developing countries.
57it Consequently, exchange rate policiesr particularly those of the deve loped countries; -have to be re—aligned in such a way as to conform with the requirements of more stability in world exchange markets, especially
if acpount is taken of the fact that a large number of African countries
are subject to unilateral decisions taken by the intervention currency countries. Surveillance by the IKF should also be rigorous and conducive to a marked improvement in the global adjustment process. Ih addition,in ;the face of such a situation-there is an urgent need for improved access of African and other developing countries to capital markets of industrial
.countries, which would facilitate the. adjustment efforts* ■ • '■IV. MONETARY AND FINANCIAL CQ-OPERATION AMONG EEVEIjOPING COUNTRIES ,.■
. A,. A Historical Perspective : .
.C8. Tho concept cf Economic Co-operation among Developing Countries (ECDC)
forpE cxi integral part of the notion of the New International Economic
Order. It implies above .all else that developing countries should mainly
rely upon their own efforts in order to achieve joint economic growth and
development«E/CN.1A/AMA/110
r9. In pursuance of the objectives of ECDCf the developing countries have
^ma&e' reeoEinendationa to the UN system and other international agencies
for appropriate-support measures. It is worth noting thai: the General
Assembly'has consistently endorsed those recommendations, i«e. for instance, resolutionc 3177 (XXVTl) of' 17 "December 1973i 324 " (XKEC) of 29 November 19741 3442 (XXX) of 9 Efecember 1975 and 31/119 of 16 December 197&i Oft 19 December 1977, the General AsBeably adopted resolution 32/l8O on; BC3DG,
which inter—alia urged "the specialized agencies and other organizations of the United Nations system/ in accordance with their established proce dures and practices, to support measures of economic co-operation aroongJ
developing countries «•••••«* Ir6 '
^0, Similarly, it ic worth recalling some of the more prominent decisions adopted at the conferences and Meetings of the Third World Countries thcio- selves« Tncse include the Third Ministerial Meeting of the Group of 77;
held at Manila froc 26 January to 7 February 1976, the Fifth Stuaisit Con**
f®t*ence of the Non—Aligned Countries ?tt Cblombo in August1 19?G and the
^Confsrerice oh Econcaaic Co—operation among Itevelopirir; Countries' at Mexicb
City in^So-itect^er 1976» Hixi& latter meeting adopted a report which, am6ng other things, included a programme of support measures ained at the rea lization of the objectives of ECDC. One of the most important recommenda tions called for the establishment of monetary arrangements among developing countries in terms of: , ,.
(i) strengthening of existing clearing arrangements and the crea-^
tion of new ones at sub-regional, interregional and regional
levels j ;: ■
(ii) establishing of links among existing payments schemes and the
creation of subregional? interregional and regional payments arrangements <open to all developing countries; -
(iii) harmonizing of exchange rate policies of developing countries so
that they could promote rather than hinder mutual trade among
f\m Etaanating from the Itfexico City'Gdnfcrencc also wes:'a recoi.ii.ienc!atioh
■for the sotting"-tip of various Working Croups of Experts to deal with specific issues within the framework of ECQC. In the field of monetary and finan cial co-operation, the Working Group on Multilateral Payments ArranrienentG
at
^2. Tlie Working Group on Multilateral Payments' -Arra^genents among Develop
ing Countries recommended the establishment of the Co-ordination Ccjf:
Qii! ./Multilateral Payments and Rfonetary Co—operation among Developing Countries after ratification by-'the appropriate governing bodies of the
<H&tltilateral Payments' and ■Clearing 'Arrangerients,
3'crM/ /ArA/vr P.- e 17
r^>. The first meeting, of the Co~orc^ 1-'!.?tIon Committee on f^otilateral
Payments and Efc-ietar•-', Co-p:Der"A.: prt- '^ .op- Developing Cornier:" es i:?.c convened at'Bangkok; from 11 to, iV^iy 197&,- T1. e Cpr-orc'lnM:^. Cbnuittee is entrusted
with: .. ... ■. .. ... ... ■ . .. ,..._,-. i , . ■ .
(a) T-rorking towards the attaim.:ent of the objectives of monetary.
"" co-operation enunciated >y the Group of 77 and promoting closer co],]la^3ration -among.,,developing countries on issues, relating to, _,
"* "uuitna^ter*k*l~paynETits-and"monetary-:arrangement»7~7T~r~"~"—":\~
(b) facilitating i;he. exchange of infornation ainong th,e participating organizations; ,. ; .,: _. -. ... ., .v __ .,,-. . . .. .... ... ;
(o) r considering .ways, and means of xraprpving the operations and . ..-effectiveness of existing- paypents and monetary arrangements;
s(d) arranging, assistance, whenever required to emerging/multilateral ._ . .-payuents and uonetaqy arrangeaents; : . . ...
(;-:■) considering proposals regarding the establishment of links ariong soi.ie or all of -the paypejits , anfi monetary" arr.angeiiien/ts of develop
ing countries; r -. ' i ■
;..!.;,. ■ . . . .... .. ■ , . ■ ■ . ' ■ ,;
(f) , considering .proposals ifpri, the.^establishinent of special "arrange—
. ,i ■■Aiients between the clearing ;and. payments arrangement^ of developing
;, cpiontries and the settlements, system of the countries i-ihieh are
members of the Council for Mutual Economic A^rir.tnnce (CMEA)
*B. So, e Highlights of F.fonetary and Financial Co-operation aL/onf. Ebyeloping
Countries ^ -■
rta T^ie Fettin1'?—i'p of monetary and payments arrangements in the Tiirrl Ilorlc"
is an important achievement of the developing countries,, The United Nations system, especially the regional economic corjEiissioris, have played a sub
stantial catalytic role and xn.ll"continue to do so in future.: However, there is still scope for 'improving sbue of ■' the existing operational structures and to widen the:.! in order to promote financial and "coLjmercial: relations,,
er, Thfi' antvir.l ccrhir into being of the Co-ordination.Cotmnittee marks a definite advance towards strengthening the concept of collective self— :;
reliance among the developing countries in the field of tuonetary and finan cial co-operation*\ ' To be able to realize any scheme:of trade expansion through a gradual''process of liberalization of tariffs and other1 obstacles,
developing countries would need to ipply a seriesr of concerted monetary
and financial measures that could compensate structural trade imbalances
ai.iong ,the participants. ..■■■:';■
E/CN.1//AMA/I10
Pare 18ff After reviewing the operational structure of existing and envisaged monetary and financial co-operation in the Third World, the Co-ordination Committee observed that special multinational trade financing facilities would need to be developed for purposes of supporting both trade expan sion in general and for measures in favour of the least developed countries in particulari
(i) fAiitilateral Payments and Monetary ajjd Financial Co-operation appng
African Countries
(y ECA secretariat has recently undertaken a number of activities in the fields of payments, monetary and financial co-operation in Africa.
An important effort was the preparation of a study and ultimately an agree ment for the establishment of a clearing and payments union for Central Africa nore or less on the pattern of the West African Clearing House.
That agreement was actually signed by the competent authorities of the countries concerned early in 1979« Further, a working group has been set up to undertake work on the actual establishment of this important insti tution. Another related activity ts the preparation of a. protocol on clearing and payments arrangements for Eastern and Southern Africa. Thin
was in response to a request by the Lusaka—based MGIKXJ (Multilateral Programming and Operational Centre) Council of Ministers at a meeting held
late in 1977m This protocol has now been prepared with a view to submitt ing it for consideration to the Intergovernmental Negotiating Team engaged at present in the establishment of the Preferential Trade Area for Eastern and Southern African States, The protocol will tafco account of the previous study prepared by the ECA secretariat, in this respect, and of the viewsof the Association of African Central Banks. The protocol vould be followed
by further studies on the actual establishment of the envisaged institution. Both the protocol and the other subsequent studies would be presented
to the Assembly of Governors of the Assembly of Governors of the Associa tion of African Central Banks in due course.£8 Furthermore, the Assembly of Governors of the Association at its fifth regular meeting, agreed that a study on the feasibility of adopting a standard monetary unit of account;for both clearing operations and settle ment of net balanceswithin subregional clearing and payments institutions should be undertaken. Accordingly, the IMF was contacted on the possibility of preparing the study, A positive response has been received from this institution in this respect.
£q Also, preparatory work would be initiated in Ootolxsr 1979 on the feasi bility of establishing a clearing am! payments systcn within the framoTiork of an appropriate trade institution for North Africa. Activities will
also be continued on the support and strengthening of the West AfricanClearing House (WACH) so that it could meet the needs of the Economic Coonunity of West African States (ECOWAS). The membership of this latter
institution is now thirteen national central banks. It is, proposed to
expand the nemborship to reach 16, i.e. comprising all the central banks
of the countries of the ECA West Afric;\n Subradon. Su^ort will, inaddition, be provided to the African Centre for Monetary Studies which
E/CM.1//AMA/1I0 : .- Pare 19
has become operational since January 1976. Apart frota assuming the task of technical secretariat for the Association of Afriban Central Banks, the Centre err-^s in research, publication and training in the fields of money,, .'.suiking end finance,. including international monetary and finan
cial developments* ,
70. Furthermore, ECA is currently nlanriinr* to continue its-efforts, in collaboration with the Association, on the establishment of subregional associations of conimercial banks uore or less on the pattern of the one ,that exists at present in West Africa. It is also envisaged to amalgamate 'ultimately these .subregionai commercial bank institutions into an :a£l-
Africa'association of commercial banks in the future. A related activity is the establishment of insurance and re-insurance enterprises at the national ^evel, where they do not exist at present, and at the subregional leyel in order to, engage in large-scale' insurance and re-insurance trans actions. At the all-African level the African Rc-insufance Corporation has already been established and, therefore, is at present operational.
.'. . , ■'. ,, .'„,'.. . •
71. In the field of export credit financing and export credit financing
insurance, it nay be possible to obtain the required expertise in this respect in the irxiediate future. As a result, work trill be started Mediately - on , the setting up of appropriate institutions at the national and multinational
levels, This would assist in the promotion of intra-African trade still further and at all levels. On the production side,"it is proposed to establish development banks at the subregional level, where they do not exist at present. The idea"is that each of these banks would be linked to each of the African trade institutions, existing or envisaged, in order to finance development projects, particularly those of a multinational nature, anchor those which could lead to the expansion of producing export- oriented goods for trade within the subregional trade institutions,
(±i.\ Existing arranreuents
J.* Clearing arrangements .
72. There are at present seven clearing arrangements among developing
countries:
(a) the Asian Clearing Union in which participate Bangladesh, Burma, India, '"Iran, Nepal, Pakistan and Sri Larika;
(b) the Caribbean Community Multilateral Clearing Facility composed . . of Barbados, Belize, East Caribbean Currency Authority, Guyana,
■ Jamaica and Trinidad and Tobago; ■"■■■'•'• ,
..»■ (c) the Central American Clearing House whose members are Costa Rica,
■ El Salvador, Guatemala, Honduras and Nicaragua;
E/CN.1//AMA/110 Pare 30
;(d) the Great Lakes Economic Community^ Rfonetary arrangements comp-
■ rising Burundi, Rwanda and Zaire;
(^e) the Latin American Free Trade Association's payments system. Its members are Argentina, Bolivia, Brazil, Colombia, Chile/ Dominican .: Republic, Equador, Mexico, Paraguay, Peru, Uruguay and Venezuela;
. (f) the Asian Clearing Union consisting of Iran, Pakistan and TXirkeyj (tt) the West African Clearing House participated in by Benin, Gambia,
? Ghana, Guinea, Ivory Coast, Liberia, Mali, Niger, Nigeria, Senegal,
Sierra Leone, Togo and Upper Volta,
7?. The main objectivecf the institutions to facilitate the expansion of trade in addition to other current transactions anong the'participants.
2. Monetary Arrangements
71. At least five multilateral ,monetary arrangements among developing
countries have been established!(i) the Arab Monetary .Fund whose members are Algeria, Bahrain, Egypt, Iraq, Jordan, Kuwait, Lebanon, Libyan Arab Janahiriya, Mauritania, Morocco. Oman, Peoples1 Democratic Republic of Yemen, Qatar,
Saudi Arabia, Somalia, Sudan, Syrian Arab Republic, Tunisia,
United Arab Emirates;and Yemen Arab Republic;(ii) the Andean Reserve >und composed of Bolivia, Colombia, Equador,
Peru and Venezuela; ,
(iii) the ASEAN Swap Arrangement in which participate Indonesia,
Malaysia, Philippines, Singapore and Thailand; ( ■}
(iv) the Central American Monetary Stabilization Fund whose participating members arc Costa Rica, El Salvador, Guatemala, Honduras and
Nicaragua;
(,) the Latin American Free Trade Association's Financial Assistance Agreement, Its members are Argentina, Bolivia, Brazil, Colombia, Chile, Dominican Republic, Ecuador,' Mexico, Paraguay, Peru,
Uruguay and Venezuela. • . ; ■
yc These arrangements pursue different objectives-based on the specific interests of the participating countries. However, there does exist a clearly observed common denominator among then. ^^X Tnter- suDDlementing the=balance-of-paynenta.financing provided by the Inter national Monetary Fund in order to avoifc restrictions ori convertibility
and/or exchange rate instability.
E/CN. I'/AM/110
Pare. ?1
3« ..Monetary Unions - . . : ^ _^
The only known existing arrangements of this type ares
(i) the Central African P/bnetary Union in"which participate the
'Central African Empire, Congo, Gabon and United'Republic of„. ,r Cameroon; .-.,.:.... .
(ii) the West African Monetary Union whose membership consists of
Benin, Ivory Coast, Niger, Senegal, Togo and Upper Vblt77. Efforts, to reconstruct the monetary union of the former East African Community have been abandoned 3 but some progress has been reported con cerning the objective of establishing a clearing and payments union in Central America in respect of which an agreement bad already been signed ., by the central banks, concerned*: , Moreover,' quite a number of developing countries are; expected to play an active role in the future in the achieve ment, of economic co-operation:among themselves and with other developing
nations. :... _ .
4» Other Types of Financial Arrangements
7S. Monetary and financial: co-operation araong. developing countries may at times, take on an indirect shape. For instances
(i) payments surplus from the oil exporting countries are channelled through multilateral institutions such as IMF (oil facility and related subsidy account) and the World Dank;
(ii)p: OPEC,countries have on many occasion© established multilateral ,. institutipns both for the provision of investment funds, on '_ concessional basis, and for technical assistance* l\fost important
amonj3 these are the Arab Fund for economic and Social Development,
the Arab, bank for Economic Development in Africa and the' Arab
lavestoient Co'mpany, , Contributions have also been committed to :
regional institutions-such as the African Davelopnent Daink$ :
(iii) at the regional level, there is the recent emergence of theAssociation "of African Development Finance Institutions.
* ■.
C. Arrangements enviianed and in the pipeline • ■ ■ :
79. Collective self-reliance among developing countries and by regions can
be facilitated to a Certain degree if;there, exists among then sone kind of nonetzry and/or financial arrangements which aim-at expanding trade;.
betrreen the members and at ensuring the implementation of specific develop
ment projects.
E/CN.U/AMA/110
Pare ??
T*^_ Monetary and Financial Co-operation anpna Developing; Countries and
Economic Development in Africa
°'O. The importance of monetary and financial arrangements to developing
countries is partly given by data contained in Tables 4^ 5? &ijJ and **•
^1. Illustratively, on the assumption that the projected Developing Count*- ries1 Payments Union (CPU) is implemented and that all the transactions
between members are settled in a developing country currency, it appearslikely that Africa could have saved about $US1 960 million in 1975 on the basis of data shown in Table 6* and that saved foreign exchange could
have been used to import other goods especially productive equipmentneeded for social and economic development, :
82. Table 8 (Column Africa - West Asia) shows that i£ it had been possible- to have African fuel imports paid for in a developing countries1 currency, Africa could have saved $US1 391 million and channelled those savings towards development projects. In point of fact, there could have been con siderable relief to least developed and land-locked African countries through this kind of payments arrangements when supplemented by credit
arrangements in financing their balance-of-payments, ; ... . ;...8°. Trade between Africa and the Middle East consists mainly of Middle Eastern fuel exports to Africa. This can be seen by comparing Tables 7 and 8. On
the other hand, it will be noted that the Middle East oil exporting countries have large-scale industrialization programmes. It might be worth trying , to see whether arrangements could possibly be made to have African countries pay for their oil imports by exporting industrial raw materials to these countries. As it is unlikely however that the oil exporting countries of the Middle fiast could accept to totally give up their export earnings in convertible currencies perhaps a system could be explored whereby payments could be effected partly in industrial raw materials, and partly in con vertible currencies, say for instance 20 per cent in raw materials and the remaining 80 per cent in developing country currency. Turning to Table 8, one finds that for the year 1975 alone, such an arranges* could have enabled Africa to save about &US272.2 million (l 391 x 20v
iUU
8/, At the intra-African level, uonetary and financial co-operation could have many real advantages. Tables 4 and 5 offer a better illustration of this particular aspect. 3htra-^frican trade is greater than trade oetween Africa and other developing regions ^ith or without fuel flGVs.; Exception, however, does exist with regard to Africa's trade with developing Latin America in 1975 where the size amounted to SUS1 590 million as against
&US1 500 pillion of intra-African trade in the sane year.
E/CN. 1/7 APIA/11.0
CONCLUSIONS
T» decades of implementation of the International Development Strategy have not led to the achievement of the target of a 5 per cent average ; aimucflL rate of grouth in real groj3c domestic product for the developing countries. The efforts roade to this end by African countries have not '
net the required and complementary support fron the developed countries.
Ihe resources transferred to African countries fell nhort of the require ments zs the ODA/GEP ratio (097 per cent) had declined, this includes DAG countries (except for three of then )o The share of private capital in
total transfers has become larger, thus increasing the debt burden of African'counties still further0 The resources channelled through multi-lateral institutions have similarly been inadequate* Furthermore, the centrally planned economy countries ares for certain reasons, not willing
to contribute to the mobilization of resources for development aid indeveloping countries.
Sf, In view of. the above, African countries should try to rely less and less on external aid and develop policies and strategies geared to promote
collective self--reliance through such measures as strengthening of sub- regional and regional co-operation and enhancement of self-sustainingdevelopment, etc,.
37. Due to the fact that there exist at present elements in the reformed
international monetary system which still constitute real problems inregard to the stability of worFeconcuy in general and to that of the
economies of African and other c'evelo^in- countries in particular, furtherreform efforts should be initiated as soon as possible with a view to the
attainment of a pore rational and stable international monetary system.1' 3*5. The IMF facilities for balance-of-payments financing should be expandedstill, further in such, a.way as to conform with the increasing needs of African and other developing countries. Such an expansion is at present all the more needed owing to the fact that these countries suffer a great deal fron sharp fluctuations in commodity prices on international markets;
from worsening terns of trades from higher petroleum prices; and consequently
from deteriorating balance-of—payments*
^- Conditional!ty attached to Pond facilities should be lessened and,
in certain cases, eliminated as its indiscriminate application to borrowingby developing IMF member countries has resulted in unfavourable effects on economic development efforts in these countries; as well as that it has also hindered, instead of assisting, the adjustment process.'
90e Surveillance over the international monetary svstem should be rigorously and strictly exercised by tie Fund? particularly in regard to developed
countries. This is all the more needed due to sharp movements in exchange rates, floating^ inflation and disorderly world monetary conditions in
■general. For this purpose, it is incumbent on the Fund to develop and •■■'
"define a concerted growth strategy for industrialized countries with'a view
tc reducing the size of the balance-of-payments surpluses and deficits.
E/CN.iy/AMA/ilO Pa-c 2L
qi The SDR should be developed into the principal reserve instrument of the international monetary system as the developing countries have repeatedly demanded. For this purpose, the SDR interest rate should be raised^, atill further so that this could assist in waking it a more, at-tracti-ve and com petitive reserve asset-and-feat its use could be widene,dv Ih addition^
further; and adequate allocaticiiG of SDRs- for development purposes should t?e
raade-j as such a. course of action -jwould not ultitaa/l:ely. increase inflationary pressures; as, alleged by some Fund members as>. well as. that, it would result:, in a more appropriate and equitable distribution of reserves©
9?# The 1}JfEp in exercising its surveillance powers; should assist in
bringing about a pore rational adjustment system whereby surpluses could .be channelled to. deficit countries^ Consequently, a stable system of exchange rates should be,,developed and establishedP thus fostering orderly econojnic growth with reasonable price stabilityQ This is all the more needed by '„.„, the majority of developing countries and by African countries in particular, due to the present tendency by developed countries towards protectionism; to unfavourable drought effects? to declining primary commodity prices and , worsening terns of trade.; and consequently io further lowering of the' levels cf foreign exchange reserves* Furthermore? efforts should be made and . directed; towards the re—alignment of exchange rate policies, particularly those of the developed countries in such a way as to conform with the require ments of stability in world exchange markets. In addition, further efforts should be.made and aimed at improved access of African and other developing countries to capital markets of industrial countries taking into account;
the fact that this would facilitate the adjustment process still further.
* " ■ ■ ■■ ■ " - ■" ..■..■■■,,■■
9^», ■ Several structures of monetary and financial co-operation could emerge with, the passage of tine at the subregionaly regional and interregional, levels depending on the circumstances*. Therefore? attention could be turned to
exploring the feasibility of £ . _ . : ■
: (i) A Developing Countries* Payments Union (DPU). which should aim, at
facilitating and increasing trade between developing countries; ,
(ii) Subregional? regional and prospective regional development banks
that could aim at encouraging the provision of necessary finance as well as earmarking non-~reirabursable funds for pre—investment activities related to co-operatipn in the productive sectors;
(iii) Financial institutions which coulds
(p.) participate in equity financing of productive ventures;
('.y , take the- initiative in assisting with the establishment
o£ a regional technology facilities and of institutions for
■ project preparation and implementation.,
T e :±nsi; tu^ionp infic&fe^ under ('') ?'~r\ (;i:;) a'-Qv'e could .ultimate!"
1 e a.ialra :aterT at the rpriohal star-e:vith si '.lar instituHons on an inter—