r
f UNITED NATIONSECONOMIC AND SOCIAL COUNCIL ECONOMIC COMMISSION FOR AFRICA
I)jstL: GENERAL
E1ECA/TRADE/92/1 O/Rev_I 25 February 1994
ENGLISH
Original: FRENCH
Meeting of the Intergovernmental Group of Experts of the Fifth Session of the Cunference of African Ministers of Finance
Libreville, Gabon 25-28 February 1994
Fifth Session of the Conference of African Minister of Finance
Libreville, Gahon 1-2 mars 1994
EFFECTS OF THE RECENT EVOLUTION OF THE INTERNATIONAL ENVIRONMENT ON NET TRANSFER OF RESOURCES TO
AFRICA
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I. INTRODUCTION
1. Two major questions dominate current development financing prospects in Africa:
Are African countries capable of mounting external resource mobilization campaigns in an international environment marked by rapid changes which increase the competition for international capital?
Are the various pillars of international development financing consistent with development imperatives, and are they likely to promote economic recovery?
2. The first question is linked to the profound political and economic changes that have taken place at the international level during the last few years and their repercussions on international financing flows. New realities have appeared, which greatly influenced political and economic conditions in the world in general, and in Africa in particular.
3. The second question mostly concerns attempts made to increase the effectiveness of external financing and of efforts made by the beneficiary countries themselves. It relates to the ongoing debate between the industrialized countries and the developing countries dealing with increase in development financing at favourable conditions as requested by the developing countries, and with the rigorous structural adjustment to be put in place in order to ensure rational utilization of resources, a sine qua non for the mobilization of private capital flow and for effective utilization of aid, as demanded by the donor countries.
4. The following chapter deals with the first question. It tries to highlight a few important aspects of the evolution of the environment in Africa and in the rest of the world, while examining the capacity of African countries to face these changes and challenges. On the basis of this analysis, Chapter III appraises the external financing trends over the last ten years. Chapter IV tries to provide an answer to the second question by analyzing the impact of foreign capital on growth in the 80s. Chapter V analyses short and medium-term prospects of financial flows to Africa, taking due account of the recent trends that have characterized the international context. Chapter VI summarizes the major conclusions of the study and makes proposals likely to improve the mobilization and effectiveness of foreign capital for development financing.
II. INTERNATIONAL POLITICAL AND ECONOMIC SITUAnON: CHANGES AND CHALLENGES
A. Situation in Africa11 (i) Economic Evolution
1/ This section is based on the following documents: (a) ECA, Economic Report on Africa, 1991, E/ECA/CM.17/2; (b) African Development Bank, Report on Development in Africa. 1992.
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5. On the whole, the African economy continues to come up against many obstacles inherent in its institutional systems: red tapism, serious macro-economic imbalances, high cost of production inputs, poor allocation of resources etc... External factors have also seriously hampered and continue to hamper the growth of African economies, resulting in the fall of the prices of most raw materials, the erratic variations of exchange rates, high interest rates on the world capital markets and protectionism by the industrialized countries.
6. In 1991, the Gross Domestic Product (GDP) increased by only 1.9% compared to 3%
in 1990. This is attributable to a slight fall in growth and world trade at the beginning of the present decade and to the cost of economic and political reforms. Besides, with an annual average population growth rate of 3 %, per capital income has continued to decline at an average rate of 0.3% over the last three years.
7. Efforts of economic and financial restructuring on the continent notwithstanding, mobilization of local resources has been low. Domestic savings rate (in percentage of GOP) was only 18.5% in 1990#92 as against 19.6% in 1980/82, and domestic investment rate was 20.3% in 1990/92 compared t 23.7% in 1980/82. These negative trends affected both subsaharan Africa and North Africa (Table I).
8. With regard to trade, in 1990 exports increased by 15.5% in value and imports by 13.6%. As a result of the more rapid increase in unit values of exports (12.8%) compared to the average price of imports (9. I %), the trade index of the region improved hy 3.4%.
Trade deficit was brought down to US$3.9 billion in 1990 as against US$3.9 billion in 1990 as against US$4.4 billion in 1989. This reduction of the global deficit was however due to the limited number of countries, mostly oil exporting countries, which benefited from the increase in the prices of oil following the Persian Gulf crisis. The importing countries, which are in the majority, have seen their oil bills increase by US$2.7 billion compared to 1989.
The Gulf crisis also led to a fall in aid and transfer from the countries of that region, as well as enormous losses in the tourism industry. Forecasts for an expansion of African exports in the short term were not bright on account of recession in the industrialized countries and that led to a slowing down of the volume of trade. Preliminary estimates for 1991 pointed to a fall in exports and imports by 5.6% and 1.4% respectively, as well as a deterioration of the terms of trade by 12.6%.
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Table I
Investment and Savings in Africa (in % of GDP)
1980/82 1990/92*
Domestic Savings 19.6 18.5
North Africa 27.6 24.3
Subsaharan Africa 15.7 16.1
Domestic Investment 23.7 20.3
North Africa 32.8 27.7
Subsaharan Africa 19.3 13.7
African Development Indicators: UNDP/World Bank 1992
*ECA estimation.
9. As in the previous years, the external debt issue is at the core of the concerns of the international community Zl, especially as the situation has not improved in terms of significant reduction of the debt burden. The debt stock increased by 4%, rising from US$268.6 billion on the average in 1989/90 to US$279.1 billion in 1991/1992. Since the GDP has progressed at a low rate (2%), the debt/GDP ratio has increased within the period under review. The debt servicing ratio decreased on account of the higher annual average growth rate of exports of goods and services over the last three years, coupled with an accumulation of arrears of payment on the debt.
Table II
Africa's External Debt and Debt Servicing (Average; hillions of US$; percentage)
I
1987/88 1989/90 1991/92
External debt 252.2 268.6 279.1
- -
Debt servicing 23.2 27.2 26.8
DebtJGDP(%) 83.7 91 99.7
Debt servicing ratio (%) 32.8 1.8 27.6
£/ This was testified by most governors, both regional and non- regional, during the last meeting of the African Development Bank held in Dakar, Senegal, from 12 to 14 May 1992.
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E/ECA/TRADE/92/10/Rev.1 Page 4OECD, 1990 Survey, WDT 1992/1993 (*) Estimation .
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10. On the whole, the initiatives taken since 1987 to alleviate the debt burden bas - produced only a limited impact. In 1990, debt restructuring operations focused mainly on bilateral debt for a total amount of US$8.2 billion (i.e. 3% of the 1990 debt) compared to US$16 billion in 1989 (6% of the debt stock). These restructuring operations were carried out under the terms of the Toronto Plan which provides for a reduction of the debt stock and debt servicing. A recent report publisbed by the ECA
3/
estimated the debt alleviation at about 6% of the total volume of Africa's debt. The same report estimated at only 2 % the savings made on their debt servicing by the 12 subsaharan African countries which participated in the first phase of the World Bank 1988-90 special assistance programme. The second phase of this programme launched in 1991 covers the period 1991-1993.11. It should be noted that apart from bilateral debt, only two African countries benefited from the private debt reduction initiatives, viz Morocco within the framework of the Brady Plan and Niger thanks to IDA debt reduction facility. The major impediments to the implementation of these plans stem from the restrictive conditions imposed and the reluctance by the commercial banks to grant debt and debt servicing relief.
12. With regard to multilateral debt, its increasingly heavy burden in relation to the overall debt incurred is a source of serious concern because so far there is no agreement as to itsrescheduling, hence the net negative transfers in respect of non-concessional multilateral debt (see graph). The initiatives taken by the Bank and the Fund have generally reduced the multilateral debt burden through the replacement of non-concessional debts by a new debts with more liberal conditions. Despite these measures, net transfers, vis-a-vis these two institutions remain negative.
l.j Africa's external debt burden and effects of recent measures -taken to alleviate the burden, doc. EjECAjTRADEj91j20.
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E/ECA/TRADE/92/lO/Rcv.\
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1.5
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-z 1984 1985 1986 1987 1986 1'911'9 f99{1
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2. General Political Development
13. The political situation in Africa is still marked by diverse conflicts. some countries of the continent continue to be ravaged by civil war. During the last few years, however, efforts have been made to resolve most of the conflicts.
14. The probable end of all these conflicts would create a favourable environment for economic growth. Firstly, it would allow for a significant reduction of military expenditure.
The resources thus saved could saved could be devoted to the production of goods and services. Secondly, the return of population's displaced by wars would allow for the resumption of production activities, especially in the area of agriculture, and a reduction of humanitarian expenses which African countries must meet apart from external assistance.
15. The reconstitution of the economies ruined by wars will be costly in the short term, resulting in a probable increase in the demand for assistance. In the long term, however, the end of conflicts will make it possible to devote energy to the realization of the integration of African economies through concrete programmes in the areas of infrastructure, trade and production which could attract substantial capital.
16. There is no doubt that with the current democratization process, Africa is going through a radical change which should give rise to constructive ideas likely to speed up the rate of socio-economic progress.
17. On-going movements for the advent of more democratic systems of government indeed provide solid bases for a positive development of Africa after more than a decade of stagnation and decline. These changes, as well as the end of the cold war also offer Africa's partners, especially those within the Development Assistance Committee (DAC) and private investors further opportunities to make a more effective contribution in the form of assistance and/or investment devoid of strategic calculations and considerations which characterized financial flows during the East-West confrontation.
B. Recent Development in the Rest of the World
18. The end of the 80s and the beginning of the present decade have witnessed spectacular changes. These include, among others:
(a) the end of the power struggle between the East and the Western blocs which modified Africa's geostrategic importance;
(b) intensification of efforts aimed at creating economic and trade groupings in other regions of the world;
(c) thc growing world demand for resources for a stagnating savings and, consequently, a keener competition for this savings;
E/ECA/TRADE/92/10/Rev.l Page 7 (d) international trade liberalization within the framework of the Uruguay Round
agreements;
(e) adoption by the donors of new conditionalities for the granting of aid such as political pluralism, respect of democratic principles, transparency etc ..
19. On the economic plane, the recession in the industrialized countries which was foreseeable at the end of 1989 worsened in 1990 and 1991, resulting in the fall of the growth rates of world trade from 8.5% to I % between 1989 and 1991.
20. In anticipation of increased international economic competmon, European Governments and enterprises invest more in the modernization of factories and in technological innovations. The industrial, financial and monetary integration provided for in the Maastricht Treaty would allow for a more effective allocation of resources and would stimulate investment within the European Community. European enterprises have already begun to implement an European production alliance and decentralization strategy which would help increase capital effectiveness in Europe. As a result of such anticipations, the countries of the European community are becoming more and more a destination for direct foreign investments from other industrialized countries, especially Japan and the United States.
21. Developments in Eastern European countries 1/ and former USSR, particularly the transition to market economy, have certainly affected official development assistance flows to Africa. The dislocation of USSR and the end of communism as State ideology in Eastern Europe has had as immediate consequence the fall, and in some cases, the abolition of aid from the countries members of Mutual Economic Assistance Council (CMEA). The former USSR in particular has played a considerable role in the financing of the economies of some African countries. Besides, the reconversion to market economy requires considerable resources for the upgrading of production and marketing infrastructures and systems.
22. The transition to market economy of former European socialist countries and ex-USSR would probably increase the competition for resources in that there would be new demands for a stagnating or declining world savings. Saving rates in the industrialized countries dropped from 25% in 1972/73 to 20% in 1988/89. In the developing countries, it fell from 30% in 1992/1973 to 22% in 1988/1989 'i/o
~/ Within this context of the reconversion of former Eastern European countries, the transformation of the German Democratic RepUblic (GDR) into a market economy has been one of the major shocks of 1990. Indeed, on 3 October 1993, GDR ceased to exist.
It was replaced by five states (Lander) linked the same day to the FRG. Read the implications in Finance and Development:
"Europe: Change and challenges", December 1990.
'2/ AGHEVLI AND AL:
Economy: Recent Trends paper, no. 67, 1990.
The Role of and Prospects.
National Saving in world Washington, IMF Occasional
E/ECA/TRADE/92/IO/Rev.1 Page 8
23. However, one could anticipate resource savings as a result of reduction in military expenditure following the end of the cold war. Eastern European countries and former USSR would be the major beneficiaries. These countries constitute an attractive zone for European investments. The costs there are relatively low for a more qualified job and burgeoning markets. Besides, being geographically and culturally close to the industrialized countries of Europe, Eastern Europe constitutes an obvious destination of direct foreign investments from the European Community. The first signs of the post cold war confirm this trend with the establishment of an European Bank for Reconstruction and Development (EBRD) in favour of Eastern europe, and a significant cancellation of the debts of these countries (Half of Poland's debt was cancelled recently).
24. The new trade liberalization measures aimed at tariff and non-tariff barriers adopted by GATT member countries at the end of the negotiations of the Uruguay round should, according to GATT forecasts, lead to an increase in world trade by about US$200 billion.
this increase will come mainly from industrial sectors and services. It is generally acknowledged that trade liberalization will have adverse effects on the prices of agricultural
produce on the world market.
25. This explains why European farmers unions are exerting pressures on their governments to maintain and guarantee agricultural revenues. It is therefore not certain African countries which have a comparative advantage in the production of certain agricultural goods will be able to increase their market shares following the trade liberalization. Preliminary estimates on the contrary show that with the abrogation of preferential arrangements for the production and export of certain products, Africa will not only Jose export market shares but will also see its import bills increase on account of the expected rise in the prices of food products due to the reduction of production and export subsidies in OECD countries
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II. NET FINANCIAL FLOWS TO AFRICA: MAJOR QUANTITATIVE TRENDS 26. The financing trends of African countries are summed up in Table Al and in graphs
1,2 and 3 attached. The contributions are classified into the following four categories:
Public development financing which according to the definition adopted includes official development assistance, bilateral and multilateral loans of the public sector with non-liberal conditions, as well as donations from voluntary organizations;
Export credit which encompasses export credits granted or guaranteed by official organizations of Members of Development Assistance Committee (DAC), as well as other private and public contributions from DAC countries;
~/ "Evaluation of the Draft Final Result of the Uruguay Round by African countries", African MTN Project; RAF/87/157, 2 December.
E/ECA/TRADE/92/1O/Rev.1 Page 9 Direct investment which comprises direct investment flows from companies whose headquarters are located in DAC countries;
Financing on private capital market. These are mainly consortium credits.
A. Net global flows and transfers: an overview I. Net global resource flow
27. Itemerges from table A I of the statistical annex that net resource flows to Africa were estimated at US$34.8 on the average in 1990/92, i.e. a 16.4% increase in nominal terms and 1.1% in real terms (at the 1989 prices and exchange rates) compared to the 1987/89 average.
Flows in respect of public development financing (PDF flows) and export credits contributed to that rise. PDF flows increased by 24.9% in nominal terms to reach US$1 billion, compared to 0.8 billion in 1087/89. Private flows, a third component of the global flows, fell by 20% and represented only US$2.8 billion, as against US$3.5 billion on the average in 1987/89.
28. Private flows represented about 20% of the global flows during the first three years of the 1980 decade. In 1990/92, their share of the total almost fell by half. PDF flows however increased, rising from 64.4% of the total flows in 1981/83 to 79.4% in 1987/89 and 85% in 1990/92.
29. PDF flows from bilateral and multilateral sources have on the whole followed the same trends, with some variations appearing in the desegregated data (table Ill). Between 1984/86 and 1987/89, PDF flows from bilateral source increased slightly faster than the overall PDF flows. However, that increase is attributable to non-concessional assistance flows occasioned mainly by the renegotiation of bilateral public debts whose increase was about 69%. During the same period, development financing institutions increased their funding by 27% including 39% growth with respect to concessional flows and a 7% fall in non-concessional flows. Preliminary estimations have shown that non-concessional bilateral flows increased on the average from US$2.7 billion per annum between 1987 and 1989 to US$1.4 billion in 1990/92. During the same period, non-concessional multilateral flows increased by 46.1 % compared to a negative growth between 1984/86 and 1987/89.
30. According to the most recent estimations 1/, direct foreign investments (DFI) increased at an annual average of US$3 billion for the 1986/90 period. They dropped in
1991192 to US$2.5 billion, i.e. 7.2% of the overall financing.
31. Bank credits from private sources experienced a steady decline during the period 1981/83-1990/92. Form US$l. 7 billion in 1981/83 they dropped to US$ 1.7 billion in
Z/ World Investment Report, 1993.
EIECA/TRADE/921l0/Rev.1 Page 10
1987/89and USSOA billion in 1990/92, and represented only 1.2% of total financing during that period, compared to 8 % in 1981183.
32. The other private flows composed mainly of donations from non-governmental organizations (NGOs) amounted to USSL2 billion in 1990/92 and increased steadily during the period 198211989. These flows were estimated at 3.6% of the total external financing.
E/ECAITRADE/9211 O/Rev. 1 Page 11
Public Financing Structure per Source and per Modality (US$ billions; average/year
1981/83 1984/86 1987/89 1990/92*
Total Public Development 13.6 17.5 23.7 29.6
, Flows (PDF flows)
1. Bilateral including 9.6 12.3 17.1 17.1
concessional
8.8 10.7 14.4 14.4
2. Multilateral including 4.0 5.2 6.6 6.6
concessional
3.0 3.8 5.3 5.3
II
Source: OECD, 1991 Survey (*) ECA estimations
33. Trade AI clearly shows that in the 80s Africa as a whole became more and more and largely dependent on official development assistance. Trends in the 80s per category of flow and per subregion are shown in graphs 1,2 and 3. These figures show, among other things:
(i) a steady increase in official development assistance flow to subsaharan Africa since 1984;
(ii) a market fluctuation of official development assistance flows to North Africa, with however an upward trend;
(iii) a downward trend of export credit flows. These credits decreased in 1990 in the two subregions;
(iv) unstable private flows as far as the two subregions are concerned. These flows increased in 1990 in favour of subsaharan Africa for the first time since 1986.
2. Net global transfers
34. Net transfer of resources represent the balance of net resource flows after deduction of payment of interest on external debt and profits on direct foreign investments. Net global financial transfers represent: (i) net transfers in respect of debt (flows in respect of debts - payment of interest); (ii) transfers in respect of direct foreign investments (DFI-profits) and (iii) transfers with no guarantee which do not give rise to any payment obligation.
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35. Analysis of tables A2 and A3 shows first and foremost a significant increase in net global transfers in 1990. These transfers amounted to more than US$14 billion, i.e. and increase of almost US$6 million compared to 1989. Even though net transfers in respect of OF! remained positive in 1990, they dropped significantly from US$3 billion in 1989 to 0.8 billion in 1990. Transfers in respect of debts have been negative for the second year running:
US$0.7 billion in 1989 and 2.6 billion in 1990. Net global transfers were therefore positive and on the increase due to the significant rise in transfers without guarantee which almost doubled between 1989 and 1990, rising from US$9 billion to US$16.2 billion. The growth of transfers without guarantee was interrupted throughout the 80s.
36. Analysis of the desegregated data has revealed the following characteristics;
(i) . A fall in transfers in respect of public and officially guaranteed debt from US$2.6 billion to US$I billion between 1989 and 1990. This was due to a fall in transfers in respect of bilateral debt, transfers in respect of multilateral debt having increased during the same period;
(ii) Transfers in respect of guaranteed and non-guaranteed private debt have been steadily negative in the 80s. They amounted to US$ - J.2 billion in 1990 compared to US$0.5 billion in 1989;
(iii) Subsaharan African countries have continued to benefit from a net positive global transfer, with a slight drop compared to 1989. Transfers in respect of direct foreign investments (OF!) to this subregion have been steadily negative, except in 1989 when they amounted to US$1.5 billion. These countries also benefited from an interrupted growth of transfers without guarantee which amounted to US$II billion in 1990 compared to US$8.3 billion in 1981.
(iv) In North Africa, transfers in respect of OFI were positive throughout the 80s, but dropped in 1990 from US$1.5 billion in 1989 to US$0.8 billion in 1990.
Net transfers in respect of debt were negative for the second consecutive year on account of the high interest on commercial debts. Net global transfers were however positive in 1990 due to the significant increase in transfers without guarantee from US$0.7 billion in 1989 to US$5.1 billion in 1990, mainly in favour of Egypt.
37. The calculation of net transfers of resources involves interests paid on debt but not the results (in terms of production) of corresponding investments. Consequently, transfer trends should be interpreted with caution. Thus, a net positive transfer is not always a good sign for the beneficiary economy since it adds to the debt stock which may already be very high compared to the economic weight of the country. Conversely, a net negative transfer cal lead to an improvement of the economic situation which enables to country to free itself of debts vis-it-vis the outside world. However, in countries at grips with payment difficulties, it is desirable that the transfers are positive, especially as these countries are hard up and therefore unable to make transfers abroad to honour their debt obligations. From this point of view, one can only express satisfaction at the growth of transfers without guarantee since such transfer" do not rr~;.Jt~ anv future navment ohlioarion
E/ECA/TRADE/92110/Rev.1 Page 13 B. Trends per category of flow
I. Net PDF Flows
38. Transfers of public financial resources are done through two channels:
(i) official development assistance (aDA) comprising donations and loans with at least a 25 % degree of conditional ity;
(ii) other PDF flows granted under market conditions or whose conditionality rate is helow 25%.
39. At the end of the 80s, aDA mostly henefited suhsaharan countries which received 34.8% of the net aDA flows compared to only 25.6% in 1979/80 (see Tahle IV). aDA flows from hilateral sources - 74.3% of the overall aDA flows - reveal the fundamental role played by bilateral assistance. The hulk of this assistance went to subsaharan African countries.
40. Table V relating to the distribution of aDA flows per donor has revealed the following characteristics:
(i) the dominant share of aDA flows from DAC member countries, representing close to two thirds of the total aDA flows;
(ii) an average annual growth rate of 4.3% and 4.5% respectively of aDA from bilateral and multilateral sources between 1980/81 and 1990/91;
(iii) a considerable share (77% hetween 1980/81 and 1990/91) of aDA flows from Arah donor countries. This share which amounted to 8.4% of the overall aDA flows in 1980/81 dropped to its lowest level for the first time, with
1.4% of the total aDA flows.
(iv) Flows from other sources, especially from member countries of the Mutual Economic Assistance Council (CMEA) have become practically insignificant, representing only 0.4% of the overall flows in 1990/91, compared to 2.4% in 1980/81. The dwindling of aDA flows from Arab and CMEA member countries coincided with the Gulf crisis and political and economic upheavals in Eastern Europe.
E/ECA/TRA DE/nll 01 Rev. 1 Page 14
TABLE IV
Official Development Assistance Flows - Distribution per Developing Region
1979/80 1984/85 1989/90 1991/92
Suhsaharan Africa 25.6 29.0 34.8 35.2
Asia 30.6 31.8 31 33.3
Latin America 10.8 14.3 12.8 13
North America and 26.4 20.6 16.8 14.8
the Middle East
Oceania 3.2 3.0 2.8 3.7
Other Countries 3.5 1.2 1.9 -
I
Total 100 100 100I
100I
OECD, Development Co-operation, 1991.
(*) Estimation.
Tahle V
Distrihution of aDA Flows to Suhsaharan Africa for Donor (million of lJS$; (%)
p p
1980/81 1985/86 1990/91
M.$ % M.$ % M.$ %
DAC Member 7241 58.2 9445 60.5 11011 63.7
countries
Multilateral 3852 30.9 4704 30.2 6005 34.8
Instilutions
Arab countries 1043 8A 803 5.2 239 1.4
and financial
institutions I
~Other countries 305 2A 594 3.8 63 OA
Source;OIK:D, Develo ment Co-o eranon I'}'}1.
EjECAjTRADEj92j10jRev.1 Page 15
41. The bulk of the other official financing flows come from disbursements made by multilateral development financing banks, especially the World Bank and DAC member countries. These reflect all transactions including those pertaining to debt restructuring operations. They are estimated at 21.9% of the overall public development financing flows (PDF-flows) in 1990/92 compared to 13.5% in 1982/82 (see Table VI below).
~/ECA/TRADE/92/10/Rev.1
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Table VI
Net Public Resource Flows to Africa:
Distribution per type of Flows (in billions of U5$)
1982/83 1984/86 1987/89 1990/90*
Total PDF flows 13.5 17.5 23.7 29.6
1. ODA 11.7 14.5 19.7 24.2
ODA - Bilateral 8.7 10.7 14.4 17
2. Other PDF 1.8 3.0 4.0 6.5
flows
Source: OECD, 1991 Survey.
(*) ECA Estimation.
E/ECA/TRADE/92/10/Rev.l Page 17
2. Flows from private sources
42. Flows from private sources constitute the second source of funding of African countries. These flows comprise i) direct investments (DFU; ii) credit banks from private sources and iii) other private flows (flows from NGOs, portfolio investments).
43. Private flows are estimated on an annual average at US$4.1 billion for 1990/92 compared to US$5.4 billion in 1987/89. These flows represented 11.8% of the total flows in 1990192compared to 19.9% in 1981183 and 18.1% in 1987/89. The fall in private flows between 1981183 and1990192was largely due to the fall in private bank credits which began since the outhreak of the debt crisis. These flows which represented 8% of the total flows in 1981183 dropped to 2.5% in 1987/89 and 1.2% in 1990192. (Table 1).
44. DFl flows (US$ 2.5 billion on the average per annum in 1990192) have remained concentrated on a limited number of countries. During the period 1980-88, 10 African countries accounted for 75% of the total DFI flows: Nigeria (26), Liberia (10), Gabon and Zimbabwe (7), Angola (6), Cameroon (5), Cote d'Ivoire and Kenya (3), Zambia (4) and Somalia (2). The least developed countries in africa received an insignificant share of DFI f1ows.8.! .
3. Export credits
45. Export credits flows slumped in the 80s amounting to only US$0.8 billion in1987/89 compared to US$3.4 billion in 1981/83. The share of these flows in the overall external financing also dropped during the same period. They represented only 2.3% of the total flows in 1987/89 compared to 6.3% in 1984/86 and 16.1% in 1981/83. Estimations for 1990/92 however show a slight increase compared to the 1987/89 average, both in absolute terms and in percentage of the total flows.
4. Measures to reduce external debt
46. The rescheduling of the debts of countries with low revenue under the TORONTO Plan21 did not prevent the diminution for the second consecutive year of flows in respect of long term debts. In 1990, about ten (10) African countries benefited from the Toronto Initiative for a total amount of rescheduled debt not exceeding US$8.2 billion. Itis believed that these measures made it possible to reduce debt servicing by about US$I billion, i.e.
7.5% of the 1990 exports of the beneficiary countrieslO/. However, net transfers in respect of debts remained negative, US$ - 2.7 billion in 1990 (see table All).
47. Debts owed to commercial banks continue to be treated within the framework of the Brady Plan, with often an element of debt-swaps. Contrary to negotiations dealing with
~/ African project Development Facility - 1990 Annual Report.
~/ See 1991 Economic Report on Africa, op. cit.
10/ World Bank. World Debt Tables. Volume 1. 1991-1992.
E/ECA/TRADE/92/10/Rev.l Page 18
public debt restructuring, negotiations regarding debts owed to commercial banks take more time to arrive at an agreement. Since 1983, only four (4) countries, viz Madagascar, Nigeria, Zaire and recently Morocco have signed debt restructuring agreements with commercial banks. Some countries including Madagascar and zambia were able to reduce the debts they owe commercial banks through debt equity-swaps or debt-for-nature swaps.
Despite those measures, these countries continued to accumulate arrears on their commercial debts which rose from US$2.5 billion at the end of 1988 to about US$ 4 billion in the middle of 1991. Leaving aside the arrears, the net flows of commercial credits to the group of heavily indebted countries vis
a
vis commercial banks were negative, mostly in the 80s.IV. IMPACT OF FINANCIAL FLOWS ON GROWTH AND THE
ENVIRONMENT DURING THE 80s A. Framework of analysis
48. The impact of external capital flows on the economic growth of developing countries has been the subject of an intensive analysis in economic literature. Indeed, it is around this that revolves the current debate on proposals aimed at increasing the financial resources from public sources and introducing radical changes in existing national economic systems.
49. During the North-South dialogue, developing countries insist on the need for a massive financial assistance to upgrade their infrastructures and stimulate economic growth.
The industrialized countries and the international financial institutions in their majority are of the view that it is incumbent on the developing countries to work towards the establishment of more open commercial schemes and pursue internal structural policies more consistent with market mechanisms, the only way, in their opinion, to attract foreign investments and make external aid more effective.
50. Studies conducted on the i;pact of external capital flows on the economic growth of beneficiary countries diverge as far as their conclusions are concerned. The purpose of this chapter is to measure the respective contribution of aid, DFI and non-concessional bank loans to GDP growth and to investment in Africa in the 80s. This analysis was carried out on the basis of a simple linear relationship established between growth and investment rates on the one hand and net financial flows on the other (see annex A for derivation of equations):
(9) D' = a,
+
a, (DFI)+
a, (Aid)+
a, (Ikbt)GDP GDP GDP
(10) GDPGR = b,
+
b, (DFl) b, (Aid)+
b, (Debt)GDP GDP GDP
where DI = rate of domestic investment GDPGR = rate of actual GDP growth
DFl/GDP = relationship between direct foreign investment and Aid/GDP = relationship between official development aid and DebtlGDP - relationship between non concessional flows and
GP GP GDP.
E/ECA/TRADE/92/10/Rev.1 Page 19
51. These relationships were estimated using a regression analysis in respect of 16 African countries over the period 1980-85 and 1986-90. For all the 16 countries, actual GOP increased on the average by 3.7% per annum between 1980 and 1985 and by 2.3% per annum between 1986 and 1990. Annual average investment rates represented 22.7% and 19% of the GOP between 1980 and 1985, and 1986 and 1990 respectively.
52. The results of the estimations are contained in table VII. The coefficient ratio of each of the variables shows that OF! flows have had the greatest impact on the GOP growth rate and on investment rates compared to the two other categories of flow.
53. Non-concessional financial flows have had a marginal impact on growth between 1980 and 1985 and a negative impact between 1986 and 1990. This result can be attributed to the fact that bank loans have not yielded enough incomes to cover the interest costs. The downward trend of the contribution of these flows to growth and investment in the second half of the 80s is, to some extent, attributable to the rise in actual interest rates on external debt.
54. Aid adversely affected growth and investment. This is apparently due to the fact that in the 80s, aid was essentially earmarked for current expenditure stabilization purposes within the framework of the structural adjustment programmes which had a recessive impact on the economies. However, the scope of the negative impact of aid on economic growth decreased from -0.3 of the growth rate in 1980/85 to - 0.1 in 1986/90.
55. Nevertheless, these results should be interpreted with the greatest care, for they only show the direct effects and not the net effects of external capital flows on GOP growth.
Unlike the direct effects, the net effects include the impact that external capital has on savings. Where the large portion of this capital is used to finance current consumption expenditure rater than investment, or where it does not yield enough revenues to cover interest costs, there is "local disavings" which is not favourable to production, thus limiting future savings possibilities. In other words, in view of the interdependence between GOP growth rate and domestic savings rate, the direct effects and the net effects can differ both qualitatively and quantitavely (see Annex B).
B. Policy implications
56. The following conclusions an be drawn from these various observations. Firstly, the promotion of OF! (direct foreign investments) would playa major role as far as growth is concerned. OF! constitutes the most advantageous form of external financing compared to the other types of flow. OFI is non-generator of debt and where the profits made are reinvested locally, there is less pressure on the balance of payments. Furthermore, OF!
facilitates access to management techniques, to technology and to export markets. Its advantages are therefore considerable when viewed against the backdrop of the current indebtednesscrisis. Consequently African countries stand to gain if they adopt reforms aimed at improving the business climate:
macro-economic reforms to eliminate pnce distortions, interest rates and ensure exchange rate stability;
E/ECA/TRADE/92/10/Rev.1 Page 20
political reforms to establish pluralism as well as transparency in the conduct of public affairs;
public administration reform to overcome negligence, inefficiency, corruption and other bureaucratic bottlenecks that hamper investment activities;
investment code reforms so as to make them more attractive and conclusion of agreements for the conversion of debts into direct foreign investments.
57. Secondly, it emerges that external aid is one thing and its allocation to productive employment is another. To try at all cost to increase the former without having the means to guarantee the latter would be a serious mistake. Indeed, the analysis has shown that when aid is directed to on-productive employment, it has a negative impact on GDP growth. It is possible to envisage that considering the present crisis facing most African economies, aid should be devoted to the stabilization of current expenditure in order to mitigate the costs arising from the structural adjustment. However, if one think in terms of adjustment policies geared towards growth, it will be necessary to direct more aid to productive employment.
The realization of such a strategy will be easier especially if vigorous measures are taken to also improve the management of public financesll/.
58. Lastly, the downward trend of the effect of the debt on growth could be reversed on condition that the rates of output obtained on loan-funded projects are higher than the interest rates on loans. Where this happens, the loan raises national income. Itcan be inferred that a careful selection of loan-funded projects and general reduction, on the world market, of the actual interest rate and risk premium would help reduce the debt burden and enable heavily indebted countries vis 11 vis private commercial banks to realize their growth potential.
V. PROSPECTS OF FINANCIAL FLOWS TO AFRICA
59. External financing prospects will depend naturally on the world capital supply and demand. On the external plan, the conditions for welcoming external capital will also be a determining factor.
60. International competition for financial resources should be increased, on account of the recent developments in the international environment. Under such circumstances, the capital will probably go to those who show efficiency in its utilization.
11/ A series of proposals aimed at improving the management of the economy appear in the following ECA documents:
financial the 90s"
of in mobilization
development
"strategies for the resources for Africa's E/ECA/CM.19/5, 1993;
"Mobilization of internal and external resources to finance Africa's economic development: problems and prospects - guideline document" E/ECA/TRADE/93/9.
E/ECA/TRADE/92/10/Rev.1 Page 21 A. International financial context
61. One of the important determinants of international financial flows is the level of the international capital supply and demand. An ex-ante divergency between savings supply and investment demand contributes to a rise in actual interest rates. Most of the forecasts now show that world demand for capitalwill increase because of additional expenses arising from i) the recession in the major industrialized countries, with the attendant serious unemployment situation; ii) the restructuring of the economies of East European countries and former USSR;
iii) the peace keeping operations, security and political stability and iv) the protection of nature. Furthermore, the evolution of Western European towards industrial, monetary
E/ECA/TRADE/92/10/ReV.l Page 22
62. circumstances, the capital will probably go to those who show efficiency in its utilization.
A. International Financial Context
63. One of the important determinants of international financial flows is the level of the international capital supply and demand. An ex-ante divergency between savings supply and investment demand contributes to a rise in actual interest rates. Most of the forecasts now show that world demand for capital will increase because of additional expenses arising from:
(i) the recession in the major industrialized countries, with the attendant serious unemployment situation; (ii) the restructuring of the economies of East-European countries and former USSR; (iii) the peace keeping operations, security and political stability; and (iv) the protection of nature. Furthermore, the evolution of Western European countries towards industrial, monetary and financial integration already shows an increase in investment demand as evidenced by the upward trend of stock exchange indexes since the end of the 80s.
64. With regard to supply, many indexes presage a fall in financial flows to developing countries:
(i)
(ii)
(iii)
(iv)
B.
the downward trend of private savings rates in the industrialized countries 12/;
the slowing down of economic activity and unemployment crisis in the major industrialized countries;
resource requirements in the countries of the European Community to carry out successfully the economic restructuring in anticipation of the economic and monetary union (EMU);
the dislocation of the Mutual Economic Assistance Council which brought together former Eastern European donor countries and ex-USSR.
Capital Financing on the Private Market
65. With the upward trend of actual interest rates for reasons mentioned above, heavily indebted African countries vis-
a-vis private commercial banks run the risk of seeing the interest rate on their debts go up.
In view of the keen competition to attract foreign capital, financial flows will follow the trend of actual requirements, Only well-managed economies, social and political stability will induce entrepreneurs and banks of industrialized countries to invest more in African countries.
66. Flows from commercial banks will probably remain low in absolute terms because of anticipated payment difficulties. In view of the persistent payment crisis, commercial banks
E/ECA/TRADE/92/10/Rev.l Page 23
are more careful about the quality of loans and prospects for the payment of arrears of interests on present debts. This fear is fully reflected in the constitution of loss provisions
13.1.
The level of these provisions constitute an increasingly higher percentage of the bank capital proper. The banks also have the tendency to ration credits and/or raise the level of risk premiums and bank commissions. Consequently, only a very few African countries will have accessto international financial markets. The bulk of private bank financing will be involuntary, that is to say it will be granted within the framework of debt restructuring operations.67. The share of portfolio investments in the total private financial flows to Africa is negligible and will remain so in the short term, because the stock markets are practically non- existent and most of the monies are inconvertible. However, African economies are sub- capitalized and since they are heavily indebted they should resort more to capital/risk and therefore promote the development of stock markets.
68. There has been an awareness of this necessity over the last few years, as evidenced by the recent seminar of the Association of African Development Financing Institutions (AADFI) devoted to discussing prospects for the establishment and development of fmancial markets in Africa 14/ and the recent establishment of an African Forum for the promotion of capital markets.
C. Export Credits
69. The role of export credits in the share of resources depends on import demand from debtor countries and on credit supply. With regard to demand, the debt crisis compels the debtor countries to adopt and apply a series of adjustment measures which are reflected in commercial restrictions to reduce imports and balance of payments deficit. Concerning supply, the payment crisis encourages the banks to be more careful about risks and to introduce more rigorous criteria for the granting of credits. These trends explain the fall in export credits in the 80s.
70. Most of the short-term forecasts show a slowing down of the world trade whose effects on export-credit flows will further compound the payment and structural adjustment crisis. Under these circumstances, it is not possible to expect in the short term a higher growth of export credits compared to the period 1990#92. In the medium and long terms, the prospects are difficult to determine. On the one hand, with the signing of the Uruguay Round agreements relating to trade liberalization, it is expected that international trade will be given a new impetus. On the other hand, if the payment crisis persists, it is doubtful that the majority of African countries will be able to mobilize more export credits.
D. Direct ForeiEn Investments
13/ World Bank, W~rld debt tables, Volume 1, 1989-90.
14/ MDFI workshop in Abidjan, May 1992, on the theme: "Which Financial Market for Africa?
.E/ECA/TRADE/92/10/Rev.l Page 24
71. Generally speaking, OF! flows to Africa over the last few years were made within the context of privatization of public enterprises and conversion of debts into either bonds or shares. In the medium-term, OF! flows could be stimulated within the framework of these operations and through the improvement of the conditions (legal, institutional, administrative, etc.) for receiving foreign investments.
72. A few African countries benefited from the doubling of the operations aimed at converting the debts of the developing countries into OFI between 1987 and 1989. The agreements recently concluded by Morocco, the Congo, Nigeria, Madagascar and zambia included an element of debt equity-swaps or debt-for-nature swaps.
73. Prospects for OF! flows within the framework debt restructuring operations will depend on the existence of attractive investment opportunities and political and macro- economic stability. The forecasts relating thereto stem from a rather cautious optimism.
Admittedly, for some years now, African countries have embarked on a democratization process, economic reforms and judicious management of resources. The consolidation of this process would create the conditions for the resumption of productivity and should meet one of the major conditions recently laid down by OECO member countries for the granting of development assistance. On the other hand, however, should the current economic recession in the industrialized countries persist or worsen, the economic growth in Africa could suffer the consequences. This could result in the fall in investments and might affect the debt-swaps operations.
74. The on-going process of privatization of public enterprises in several African countries also provides opportunities for an expansion of foreign participation in local enterprises, even though such participation might lead to loss of national control over sensitive sectors. A clear definition of national priorities would be necessary in order to identify the strategic sectors which will be reserved for national control.
75. In order to ensure that multinational companies do not recuperate all the enterprises to be privatized, the conclusion of co-enterprise agreements should be actively sought. As a matter of fact, the type of enterprise is more likely to develop local capacities better than a subsidiary enterprise entirely under foreign control. It is also possible to seek the development of sub-contracting which makes it possible for major industrialized countries to sub-contract auxiliary activities to local enterprises, thus encouraging the development and strengthening of indigenous technological capacities.
76. The promotion of OF! no doubt requires the adoption of investment code incentives which range from fiscal truce to property guarantee including repatriation of profits. Some countries like Morocco and Mauritius have established free zones which have proved successful as far as attracting a wide range of private foreign investors and creating jobs are concerned.
77. In addition to the adoption of direct investment incentives, support measures will be necessary to make the environment less hostile to productive activities. In many countries, the local environment is characterized by poor institutional structures, inadequate financial markets and the weakness of local capacities to ensure effective implementation of
•
E/ECA/TRADE/92/10/Rev.l Page 25
development projects 15/ from the point of view of technology, management, organization and financing. Growth recovery presupposes the adoption of macro-economic measures specifically designed to redirect financial assets to productive employment and stimulate new investments .
E. Official Development Assistance
78. Most of the African countries will continue to depend on ODA (Official Development Assistance). These flows represent about 70% of the total resource flows to Africa, i.e.
US$24.2 billion on the average per annum, 3/4 of which go to subsaharan African countries.
These countries also benefited from one-third of assistance programmes, all sources put together, during the last two years.
79. In 1990, however, there has been a significant fall in assistance from Arab countries and countries of the erstwhile Mutual Economic Assistance Council. Assistance from DAC member countries was stable between 989 and 1990, accounting for 30% of the assistance programme of these countries. However, DAC assistance now represents only 0.3% of the GNP of member countries and seems to stabilize at that level since the middle of the 70s.
This rate is less than half of the 0.7 GNP development assistance target.
80. Individual DAC member countries have recently established new assistance priorities lQ/. These priorities differ from one country to another and the prospects are uncertain.
Table AIV of the statistical annex shows the upward trend of the ODA/GNP ratio of countries like France, Switzerland, Italy and the Scandinavian countries (Norway, Denmark, Sweden, Finland). In other countries, it is a downward trend and the aDA/GN P ratio is, on the whole, hardly different from its average level of 0.35 since the 70s.
81. It is feared that part of the assistance may be devoted to the financing of such new priorities as the protection of the environment, the restructuring of the economies of ex- European socialist countries, aid to displaced people and peace-keeping operations. These new objectives do not favour an increase in the share of assistance to developing countries in the national budgets.
82. Considerable financial efforts were recently made in favour of Poland and Russia.
Substantial contributions were made for the rehabilitation of refuges and peace-keeping operations in many countries of the world. It is still early to make an accurate assessment of the impact of these financial contributions on the overall aDA package, for want of additional data.
83. Be that as it may, a significant increase in the ODA/GNP ratio of all the DAC member countries is not probable. ODA average growth should not exceed the expected GNP growth of OECD member countries (about 2%).
15/ See document E/ECA/TRADE/93/9, oD.cit ..
16/ See: GECD, Co-operation for Development, 1991.
E/ECA/TRADE/92/10/Rev.1 Page 26
CONCLUSIONS AND RECOMMENDATIONS
• 84. ODA is the backbone of Africa's external financing. With an annual average of US$24 billion in 1990/92, ODA represents about 70% of the continent's total external financing.
85. Generally, aDA flows have the tendency of following the same growth rate as the GNP of DAC member countries. A slowing down of growth is expected in the industrialized countries which, if it materializes, would have adverse effects on financial flows to Africa.
86. Projections for the 90s J]j point to a fall in flows in regard to Africa's external funding requirements. The fall would relate mostly to multilateral concessional flows on account of the drawings made in the 80s on the funds that were earmarked for the 90s. The same projections show a stagnation of private flows which, if it materializes, will increase Africa's financial dependence on official development assistance.
87. Against this background, the new situations that are heing created pose a challenge to African countries in their efforts to mobilize external financial resources. These situations include:
(i) the end of the cold war which makes the Eastern European countries and ex- USSR with better infrastructures and skilled manpower more interesting markets compared to Africa;
(ii) the universality of the economy and intensification of efforts aimed at establishing economic and trading blocs;
(iii) liberalization of the world trade with the conclusion of the Uruguay Round of which one of the probable effects will he a keener competition aimed at conquering export markets;
(iv) introduction of new conditions for the granting of aid: political pluralism, respect of human rights, transparency in the conduct of state affairs etc ..
88. In a context where international savings is stagnating and where many donor countries are facing financial difficulties, the inescapable consequence of the realities mentioned above is to intensify the competition in order to attract foreign capital. These new situations call for a surge forward in efforts aimed at mobilizing internal and external resources. "Business- as-usual" attitude will not help African countries take up these challenges. The critical importance of the success of the recovery programmes and, more importantly, of economic integration on which the revival of development depends is the element that should urge African countries to act before it is too late.
89. The approaches that Africa should adopt in order to increase the flows of external financing, more particularly DFI in a more difficult environment, are indicated below:
17/ Global Coalition for Africa, 1992, pp. 277-297.
• (a) Improve the Conditions for Receiving Foreign Capital
E/ECA/TRADE/92/10/Rev.l Page 27
90. The most important pre-requisite is the improvement of the conditions for receiving foreign investment. In this connection, it will be necessary to adopt the following specific measures:
(i)
(ii)
(iii)
(iv)
(v)
(b)
Macro-economic reforms aimed at eliminating distortions in prices and interest rates, as well as the exchange rate fluctuation which are detrimental to investment. With regard to financial policy in general, and the interest rate policy in particular, they should be designed in a way as to optimize the saving structure, increase its scope and ensure its injection in the most productive ventures.
Intensification of the struggle against corruption and inefficiency in public administration and elimination of other bureaucratic bottlenecks that hamper the activities of investors. There is need to take vigorous measures in this direction, thereby ensuring the donor countries and their public opinion that henceforth African governments will act decisively against corruption, embezzlement and other financial scandals connected with aid;
Strengthening of professional analysis, management and organizational capacities; it is strongly recommended that African Governments undertake to implement coherent national and regional strategies which are consistent, in their order of priority, to training, technical research, institutional and infrastructural needs; These measures are necessary, more so as they determine, to some extent, the resource absorption capacity and project implementation rate in Africa lll/;
Establishment of free zones and adoption of investment code incentives so as to make investments more attractive: granting of fiscal advantages, property guarantee, repatriation of profits etc.
Political stability and reforms; a long-term programme aimed at the gradual elimination of measures hampering development will be more easily attainable politically where the majority of the population are represented in political establishments and where the national political leaders have a legitimacy and enough confidence in themselves. This presupposes a democratic system of government, political pluralism, accountability and transparency.
Improvement of the effectiveness of official development assistance
91. Assistance received by Africa in the 80s did not have any significant impact on GOP growth. On the contrary, experience has shown that massive financial aid is counter-
~/ See Doc E/ECA/TRADE/93/9, op.cit ..
•
E/ECA/TRADE/92/10/Rev.1 Page 28
productive if it is not geared towards genuine productive employment sectors. The following measures are recommended:
(i) Study carefully the determining factors of the aid effectiveness 191 in order to facilitate the formulation of corrective measures where necessary;
(ii) Master public finance management through appropriate measures aimed at increasing incomes and regulating the expenditure of the public sector 201.
Aid resources would thus be free and could be devoted to productive employment;
(iii) Formulate better development assistance programmes; African countries should endeavour to convince donors and involve them more closely in the preparation and implementation of development projects. Local populations should be more involved in the implementation of projects that concern them directly in order to enlist their support;
(iv) Mobilize aid within the framework of "integrating" programmes and projects.
This will avoid dissipation of resource mobilization efforts and facilitate the effective implementation of economic integration programmes.
19/ ECA made a provision in its work programme for a study in this direction, the terms of reference of which appear In document E/ECA/TRADE/93/9, op.cit ..
20/ See Doc. E/ECA/CM.19/5, pages 33-34, op.cit ..
•
E/ECA/TRADE/92/10/Rev.l Page 29
ANNEX A
GOP growth rate in a given year t depends on investment productivity or capital output rate (r).
(1) I - -It
PIBt
The level of investment depends (i) on local saving (s.GOP) where s represents local marginal proportion to saving; (ii) on the proportion of the net external capital flows saved (x' .SKE) where s' represents the proportion to saving from funds received, and FKE net financial flows.
The combination of (I) and (2) produces the GOP growth rate of the year t equal to:
(3) !:J.PIB, ( ) ( I ) FKEt
--===-"
= SI + S I - -PIB, PIB,
Taking equation (2) into account, one obtains the expression of the investment rate as local investment ratio to the GOP;
(4) I, _ I FKEt
- - - s + s - -
PIBt PIBt
The contribution of the net flow of resources to growth and investment, as well as the evolution of this contribution in the 80s can be analyzed through functional relations (3) and (4) with FKT broken down in aid, direct investment and non-concessional debt.
•
EjECAjTRADEj92jlOjRev.l Page 30
ANNEX B
External capital flows have a direct and indirect effect on the GOP growth because of the inter-dependence between the G DP growth rate and the local saving rate which can be expressed in the following equations:
(1) TCPIB=ao+a,FKE+a2TE
Where GDPGR
FKE =
SR
GDP growth rate
External capital flow in percentage of GDP Local saving rate
In equation (s), coefficient a I measures the dircct effect of external capital (FKE) on GOP growth. By substituting equation (2) for equation (I) one obtains an equation in reduced form for the GOP growth ratc:
b =_a-"o,--+_d-,,2_d-'.)
a l-a2as
In equation (3), coefficient h l , measures the nct effect of external capital on GOP growth since it includes the contribution of this capital to local saving (a4) as well as thc impact the latter has on GOP growth (a2). The direct and indirect effects of FKE and GOP GR can differ qualitatively and quantitatively;
Qualitatively, it is possible to have a direct positive effect but a net negative effect. This is possible with a negative coefficient a4 since coefficients a2 and as are generally between 0 and 1;
Quantitatively, direct effect and net effect differ where a4 is posiuve or negative; in the first case, the direct effect underestimates the positive impact of FKE on GOPGR while in the second case, the slantwise direction is a priori indefinite.
TABLE AI
NET FLOW OF RESC 1RCES TO AFRICA
(Annual averages, in millions ( dollars, % of the total flows)
-
1981/83
US $ %
1. Public Development Financing (PDF) 13,6 64,4 1
I. ODAFlows 11,8 55,9 1
- Bilateral 8,8 41,7
-
- Multilateral
3,0 14,2 "
2, Other official flows
1,8 8,5 .
II. Net export credits 3,4 16,1 1
Ill, Private flows 4, 2 19,9 "
-
I. Direct foreign investment (DFI)
1,8 8,5 (
2. Bank credits
1,7 8,0 J
3. Other private flows
0,7 3,3 1
Total flows(I+II
+
III)21,1 100 2:·
Sources: GEeD, 1991 survey; World Investment Report
1jIECAestimation
(1) 1986/90 average for DFI (2) 1991/92average for DFI
1984/86 1987/89 1990/92
*
(2); $ % US $ % US$ %
.5 79,2 23,7 79,3 29,6 85,0
.5 65,1 19,7 65,9 24,2 69,5
I 48,4 14,4 48,2 17 48,8
17,2 5,3 17, 7 7,2 20,7
13,6 4,0 13,4 6,5 18,7
6,3 0,8 2,3 I,D 2 9
14,5 5,4 18,1 4,1 11,8
3, ,2 3 10,0 2,5 7,2
6,8 0,7 2,3 0,4 1,1
4,5 5,7 1,2 3,4
-
1 100 29,9 100 34,8 100
-
TABLE All
STRUCTURE OF FLOW AND NET C;LOBAL TRANSFERS TO AFRICA (in millions co,' dollars)
1980 1984
1. Net flows in respect of DFI 941 1390
2. DFIRevenue 3790 1661
3. Net transfers in respect ofDFI (1) -(2) -2849 -271
4. Net flows in respect of debt 12831 9671
5. Payment of interests on debt 4860 6262
6. Net transfers inrespect of debt 7971 3409
7. Transfers without guarantee 3432 4120
8. Total transfers (3)+(6)+(7) 8554 7258
:985 1986 1987 1988 1989 1990
D46 17«) 2363 2239 4218 1988
888 1680 2552 2038 1143 1199
-
458 (19 -189 201 3075 789
7638 92')'; 10100 10148 7563 5457
(]732 65:(' 5894 7883 8290 8245
_0_" -
903 2682 4206 2265 -727 -2688
-
,5780 5834 5898 7406 9048 16189
7144 3605 9915 9872 8324 14290
Source: World Bank, World Debt Tables 1991 - 92
•
•TABLE A III
STRUCTURE OF NET
TRA~'SFERSPER SUB-REGION (in millions 0: JS dollars)
1980 1984
SUBSAHARAN AFRICA
- Transfers in respect of debt 5727 1966
- Transfers in respect ofDFI -2870 -683
- Transfers without guarantee 3089 3475
NORTH AFRICA
- Transfers in respect of Debt 2214 1443
- Transfers in respect of DFI 21 412
- Transfers without guarantee 343 645
Source: World Debt Tables 1991 - 92, World Bank
.. .
1985 1986 1987 1988 1989 199
338 2472 4001 2236 2745 113
-480 -775 -743 -483 536 -4
4559 4880 5095 6668 322 1108
568 210 205 29 -474 -381
938 86~ 554 684 1539 85
1221 954 803 738 726 5H
•
•
OFFICIAL DEVELOPMENT ASSISTANCE IN PERCENTAGE OF GNP OF DAC DONOR COUNTRIES (Average)
1977/81 1982/86 1989/90
Germany 0,41 0,46 0,41
Australia 0,47 0,49 0,24
Austria 0,25 0,29 0,24
Belgium 0,54 0,55 0,46
Canada 0,47 0,47 0,44
Denmark 0,69 0,81 0,93
Finland 0,21 0,37 0,63
.
France 0,38 0,51 0,55•
Irland 0,16 0,24 0,16Italy 0,13 0,28 0,35
:
, Japan (j,n u,:'U 0/~·1
Netherlands 0,92 0,99 0,93
New Zeland 0,33 0,27 0,22
Norway O,b8 1,07
-1;,1
Sweden 0,86 0,87 0,92
Switzerland 0,22 0,29 0,31
United Kingdom 0,43 0,34 0,29
United States 0,23 0,24 0,17
TotalDAC
0,35 0,36 0,34Source: OECD Development - co-operation 1991
•
I
•
Figure 1: Net Flow of Resources1981 - 1990 Total Africa
0+1==
35 30-
25
20 15 10
...,
-
..-
__ ":"' -_ ..
I~
Private Flows-
Export CreditsB-··
PDF Flows
1981 82 83 84 85 86 87 88 89 90
•
• 1,
I
I
I
., ....
Figure 3: Net Flow of Resources 1981 - 1990 North Africa
•
...
o10
...-.~ - - -- --
-
8
6 ..._...
4 .._...._-
0-14==
-_ -.
-2
I ~ate
Flows-
Export Credits~
PDF Flows
