Finance and foreign trade in planning (Condensed)

fi ■ v.: \ -m ■

AFRICAN INSTITUTE

FOR ECONOMIC DEVELOPMENT

AND PLANNING

Session

19gg 19

57

Course of _{pinance and.}

foreign trade in planning

—'

(condensed)

by MrupvoLLET

UNITED NATION'S

AFRICAN INSTITUTE FOR ECONOMIC DEVELOPMENT AND PLANNING

DAKAR

IDEP/ET/XXXVIIl/843-1

July 1967

MR. NIVOLLET

~

OPTIONAL COURSE

:2^THÉ

PLANNING

ÕF_7"FÍNANCÍNG

AND FOREIGN TRADE

FOREWORD AND SUMMARY OF COURSE

This optional course follows on from the "Course on the

(1)

financing of the plan"; it complements it and. cannot be disassociate:

from it. The aim of the optional course is to clarify certain special aspects of policies, and techniques of financing which are of major importance to the planner in the African context.

This optional course, for which the reference number is FIN COM, is divided into three parts:

Part I : Knowledge of the international chessboard, against which background African plans are drawn.

Series 10 and 20 : Repercussions in Africa of the major international negociations actually in progress.

Series\ 30 : Reform of the international monetary systems and the needs of African countries for liquidity.

Part II: Application of policies of financing decided on in the plan.

Series 40 s Import substitution policies and diversification of exports in Africa.

idep/et/xxxviii/843-1

Page 2

Part III s Application of techniques and procedures of financing.

Series 80 ï Techniques for projecting foreign earnings and

expenditure within the context of the medium term plan

Series 90 : Techniques and procedures of financing adopted by

international organisations.

In conclusion is given:

a descriptive diagram of the interdependence between the

rate of growth estimated in the plan, the policies and techniques of financing to be decided, and the instruments

to bring into play.

o

o o

N.B. : Each of. Series 40-90 leaves room for ^a practical exercise

or for statistical commentary.

UNITED NATIONS

AFRICAN INSTITUTE FOR ECONOMIC

'

DEVELOPMENT AND PLANNING DAKAR.

ï.-V . -1'■: -I. :'•». ••• -'A

FIN COM. 10

THE INTERNATIONAL CHESS-BOARD AND THE MAJOR

NEGOTIATIONS AFFECTING AFRICA. EITHER DIRECTLY OR INDIRECTLY

("beginning)

From the Geneva conference

(1964)

^to the New Delhi conference

(1968)

^-

what is the road to take?

\)

The Geneva Conference

a)

at the beginning of the Geneva conference

- the precedents of 1927 and 1933s

(Geneva

is not the

start of the history of international economic

relations)

- the brief in the hands of the' under-developed countries

- initial positions

- the agenda

b)

during the Geneva conference - emergence of solidarity

countries belonging to the "Third World"

- the alternatives^• either to organise the markets or else

to organise a fiscal levy on trade

- the thorny problem of tariff preferences

- the interaction of trade and aid

- the lack of clear choice on the part of the group of 75

led to a compromise

(final act)

Thé voting showed that'this compromise was only just achieved.

c)

at the close of the Geneva conference

- Results of the first committees primary commodities

. . . - Results of•the second■committees manufactured goods

- Results of the third committees compensatory financing

- Results of the fourth committees institutional arrange¬

ments

- Results of the fifth committees principles which should govern trade among them those which concern Africa

(equivalent advantage)

IDEP/ET/XXXVIIl/843—10

May 1967

Mr. A. NIVOLLET.

XDEP/ET/XXXVIII/843-1O

Page 2

d)

after the Geneva conference - between 1964 and 1967 work

was "begun on the problems discussed at Geneva

- minimum aid

- reform of the monetary system

- compensatory firianoing

- tariff preferences

- foreign debt

- the balance of payments of under-developed countries

xxx

2)

The present position as regards .the economic situation and relations between the "Third World" and the developed countries The course of events between 1950 and 1962which ^was the basis for the' work of the Geneva conference in

19^4»

was modified between 19^3

and 1967» Some' of the claims of the underdeveloped countries accordingly

become more urgent, while other claims appeared"premature or were blocked by other negotiations.

a)

Changes in the economic situationL

- good years for under developed countries in 1964 and 1965

- the state of trade between Africa and the rest of the world

- a renewal of the rapid rate of-' growth in the United States increased demand by the industrial nations of Europe

- general pressure on domestic prices and severe measures ' taken to Combat it. Hence favourable effects for African countries as regards trade and unfavourable as regards international financial aid.

- prices óf exports continued' to" fluctuate between 1964

and 1967 but the underdeveloped countries were able to facilitate the adjustments required by the present workings

of the international monetary system, since they increased their foreign exchange reserves during this period?

IDEP/ET/XXXVIII/843-1O

Page 3

b)

Effects of these economic changes

As a result the real problems to be brought up for solution at the New Delhi _{conference next year} will be:

- Less that of financial compensation for fluctuations in exports of that of tariff preferences

(these

are in the course of being

solved)

- more the organisation of the markets for primary ^com¬

modities

- more the cost of financial aid and how to organise it

- and above all "hunger" that is to say the mitigation

of the unfavourable consequences of inadequate agricul¬

tural production and low agricultural productivity in the underdeveloped countries and in Africa in particular»

%

o

oo oo

o

Reading not forbidden in order to learn to work on documents

Section 1 - The Prebisch report and other documents on the work of the conference ^- the French _{memorandum - ECA} documents of the committee on trade — "Commerce extérieur et sous—développe¬

ment" by La Charriere - the Balogh memorandum

(distributed

^{at the} beginning of the

year)»

Section 2 - World Economic Survey

1963, 1964» 1965 (United _Nations)

- Commodity Survey 1962

(United Nations)

- Annual reports of the International Monetary Fund for 1964 and 1$6

- Reports by the World Bank for 1964 and 1965 ^- Reports by the Bank for International Settlements

(BIS)

for 1964 and 1965

- Reports by GATT: "Le Commerce international en 1964

(1965)

- FAO documents on the indicative world plan and studies made for the April 1965 seminar on West Africa.

■ UNITED NATTONS

IffiP/ET/xXXVIIl/843-20

AFRICAN INSTITUTE _MAI 1967

FOR ECONOMIC DEVELOPMENT AND PLANNING

M ÏTTTr„TT„m

M. NIVOLLET DAKAR

FIN COM 20

jonal'equirrLrium and ma.jor negotiations affecting Africa directly or indirectly

(continued.)

Some of you will probably be working in departments which have to do with international negotiations, but all of you need to keep in touch with developments in the present negotiations ; the mere fact of knowing

about them will the better inform your decisions on policy. It is, in spite of the disparities which exist, One Wprld. Negotiations between the United States and the Six are bound to have repercussions in Africa, and

so on. .. .r, . ...

I-

1° ^- Are _any solutions as regards compensating for fluctuations in export earnings likely to emerge ?

Long term or short The increase in drawings on the I.M.F.

term remedies ? The position taken by GATT, as orthodox as ever

ex post or

ex ante remedies? Proposed Development Insurance Fund System wanted by the Latin Americans Studies being carried out by IBRD at

the suggestion fef PREBISCH

\

Trade relations of the socialist countries with Africa

The Pasal Encyclical of Easter 1967.

.

,, . -. XiÍ< °

2° - Will world organization of the markets for agricultural commodities be here to-morrow, or is it a myth ?

- markets which are functioning, and why they are stil functioning,

- the Pisani-Baumgartner plan,

- the Mansholt plan,

- does food aid disturb the organization of world commodit markets ?

- what have been the results of the organization of export markets at national level ^- as for example in Senegal

u

?

IDEP/ET/XXXVIII/843-20

Page 2

3° ^- If the Kennedy Round succeeds, shall we see a renewal of negotiations on tariff preferences benefiting under-develo:.,od

•countries'"?'' """ 1 ' ~ ~ '

- why these negotiations between rich countries ?

- the problems raised and the struggle over, liets of exceptions,

- vested interests still remaining;

- prospect before June

1967?

scheduled signature date,

■} : i j ó ao ■i'BL'y.;: g.-, i; "00a ^. O ' ' : ::

- consequences for Africa and the other under-developed

: i.'countries.: ; >.:r■<■■^{■ ■}

4° - Association of African countries with the European Economic

r.. . Community. ^{..... , , .} > ^{^}r ^..

- can we. draw, up _a balance-sheet-? ^{— --}

- The Nigerian formula and the North African formula,

- how strong are the' centrifugal forces which have appeared

in 1967 ? ; ;; -.j; : ,

3Si' •:C- '

Bibliographical references will be given in class.

UNITED NATIONS

IDEP/ET/XXXVIII/843-30

PIC AN INSTITUTE POR ECONOMIC

DEVELOPMENT MD PLANNING

ay 1967

DAKAR Mr. A. NIVOLLET

FIN COM. 30

THE INTERNATIONAL CHESSBOARD AND THE MAJOR NEGO¬

TIATIONS AFFECTING AFRICA EITHER DIRECTLY OR INDIRECTLY

(concluded)

African countries and reform of the international monetary system

Few problems are so controversial. In few cases have technical factors and political preoccupations intertwined so inextricably to

shuffle the cards.

I shall study schematically:

1)

the why and wherefore of a reform of the international monetary system and the arguments for and against

2)

what the interest is for African countries of the result of these negotiations.

1 ^- Why reform? and how is it envisaged at the present time9

A. Criticisms made about the present system. Can it, at one and the

same time, both finance disequilibria and contribute towards their elimination?

a)

the present international - national adjustments monetary system ^- international adjustments

(1 ) through liquidity v '

- international adjustments through credit

b)

good results prior to 1960 - the deficiencies felt since but debated by some. Is adjustment effective today? Does

the Gold Standard ensure a rational supply of liquidity? Is

the Gold Standard fair and. reliable? What would be the price

of an abrupt return to the Gold Standard?

(automatic solution)

FIN COM 31.

i " • ' ' •• •

"'"Ii' 1

- v. W-; ^{.. :.. . .. .}

ï : v ):: ?: Tri"í : :. ; .

rr\ • ' "

•: ..

(^.. .'.t. :/

■i 1" : j ;

... .:•■ » ' -

-, - '■i ■ • •

IOEP/ET/XXXVIII/843-30

Page 2

P- Suggested reforms("voluntarist"

solutions)

a)

bow can we get back tç a more rational system of credit, since

there is apparently a correlation between the development of

trade and the level of reserves of foreign exchange?

b)

how can we create unconditional liquidity if the supply of

conditional liquidity is in fact inadequate? The Triffin plan. Institutionalising the swap agreement - Role of the International Monetary Fund. Suggested credit reserve unit

(France).

^U.K. suggestions. German proposals.

c)

What stage have negotiations reached at the present time?

Report by the group of Ten. Modified position of the I.M.F.

in 19660 Inadequate role played by the Bank for International

Settlements at Basle. What will happen if the American banks reject any reform? Does the agreement of the Six

(April 1967)

pressage a solution at the annual monetary meetings in Septsmb.

1967?

2 - How do these controversies affect Africa and the under-developed countries?

An exclusive "gentlemen's game" played by rich countries. The under¬

developed countries have only begun to take an interest in it recently.

There are good reasons for this.

However, according to some people it is possible to link the creation

of new reserve units with the stabilisation of the prices of primary com-

(1) (2)

modifies . Others contest this .

More recently Prebisch has studied this problem and has shown the necessity for linking reform of the international monetary system with development aid It is important to know what his proposals ^are.

Bibliography to be given in class

1)

FIN COM 32

2)

FIN COM 33

3)

FIN COM 34

...;V.:';V" ív" ■?

A i ; ii ;

.

rrvj''/'-

'\

'1ZŒI UNITED NOTIONS

AFRICIN INSTITUTE FOR ECONOMIC DEVELOPMENT 1ND PLANNING

DAKAR

IDEP/ET/XXXVIIl/843-40

Originals French

:Io Gsoaqwaeiu .t;r,'!CU"-3- .'.1

,-fd r. ,îrcfs

.

(eOiiii

.L'IoCXO Ci&O X'..

aodixo aixeq • 'jj-I'î -xi' Fllf COM 40

M. NIVOLLET

'.iriowpeanc0

(

: .TfÇíí!: ..: oxaicw^co

, zl rii:':J) ausesanco

■

.-lejíIT ( V

Le 'Sfc V^XIJPVP INTRODUCTORY NOTE ON

-ixu/jioqqo. er;~ *--i:.î --.or à ••:xoo

Import substitution and export diversification policies: ^.i.j

■Q-te. Outlines.: ^. Definitions tobcui .bei.r-cxo

Doctrinal references .7x7/- ^{Í'• :}; "

. ;or

"Experiences"! lived during the past few years

Definition■ ■ ! ■ ^sIIIWhat■mI is it I.about?■ -II.j .1 ■

£j3^ _L1

Import substitution is the creation of,local industries for the

i■ :j <:■•

manufacture on the spot of formerly imported goods.

■iv""U.' •• - ••• .'.7ÍSHi : 7,0

Export diversification involves the development of new crops

: .. ..4...4.-S ; .v.-': -

or of new industries in order to increase the range of traditional exports.

oj These two policies appear to have the same objectives that of

reducing dependence on the outside world. They are not

^m^u,ally exclusive.

Both policies have their advantages and. their disadvantages.

1 -

1 ■■

The advantages of import substitution are the following:

1)

This policy is of ten: a prer-condition for _any industrialization

2)

It can be a palliative for-,the disadvantages of the deterioration in the terms of trade which, inevitably restricts the import of the developing countries.. -v- cr0 ■ • I lor . ■"

3)

The new industries which have•-envisaged orofuee fb'r a:idcmestic market

«hioh..is thus an. existing oneraad^familiar.-.to the

.future...entrepreneurs.

(Hirschmann

^on the

illuminating

^{role of}

imports)

4)

^{These new} industries need a certain amount of protection which can

easily be established and accepted both .in a given country and at the international level, ^{t :} ., v . j. ' ^as v.:

r:;.f

0 _ The disadvantages of

import, substitution

are the» following^ -

5)

The choice .of one-type of industry rather'than ano-thef- is limited

:1 i ^. e

; "-.'"I ; v- n .• .w-•■••• • ^ "

by the size of the domestic market. Consequently, geographical imperatives intervene which _{may run} counter to certain _economic potentials

(the

^dis¬

advantage for many African countries having less than 5 million consumers.;

IDEP/ST/XZXVIII/843- 4t'<

■-•'Í ■■:**■■■" - »

Page

:?...;i;..

^-, -

.']ÇF!.Í %''Í \IS-i-t• ^{. ..} 'i'Tvl

•1\~; T • >v$- ^...

very

fhequerit

in

Africa).

6) Consequently,

this policy frequently presupposes a close

economic integration with neighbouring states and thus a certain political

consensus

(Latin

American

experience).

7)

There may occur a tendency to produce goods either of inferior quality or at a cost which bears no relation to the opportunity costs.

(References

^{on this} -point can easily be

found).

8)

New industries created under such conditions are a direct_cause

of inflation which is aggravated quickly if there is an inadequate supply o food stuffs^"t ,p4QV

(example

*v: '. .1 ^{of India or}

Brazil).

..i.-orcdv'

9)

In so far as those industries are created with the aid of

public funds, they become indispensable and exeirt a-sort"of"permanent political pressures

(Latin America).

10)

Suchsa policy has its-limits ^. By abolishing imports and hence customs duties, it alters 'the

búdget

equilibrium for those States in which import duties and taxes ré'preèent over

70%

of the budget revenue

(ca.se

of African

countries),

^{_ i::"' " —}

8- The^'• merits_...of export diversification can be

deduced~fhõm"the"disadvantages

...i r j ^. sjgi • '-.Li.

of import-substitution policy.

1)

Such diversification does-not necessarily.assume-lhe existence of a larger' "domestic

market}

nevertheless it does assume that an intra regional market is within reach. , : -

2)

The risks of error-as regards orientation,-or choice of projects

are less great than in the case of imports-substitution because the inter¬

national market plays the role of a sound indicator.

v31 ^; This: diversification1 policy makes

"it'possible

to" reduce dependence oh _{exports of} primary commodities, its 'effects on the balancé of payments

are often smaller than in the case of import substitution

(Examples

oil

refineries in

Senegal).

^. 't-'

' •-•-ir V-"f£ "1 ■ ■ ^. , j- |- - -à ••

A ;The disadvantages of diversification are the following:

r'

4)

It often requires protection, and this protection takes tho form of a supsidy,J.which is not .So easily accepted at lhe- International level,

(e.g.

if preferential.aqcess to the markets of deVelópôd countries is

request^)..,,

^{.„ ,}-hr--.

3

' ■ 1 in "

ot "'0 'A-f .hid v ; •

UNITED NATIONS

AFRICAN INSTITUTE FOR ECONOMIC DEVELOPMENT AND PLANNING

IDEP/ET/XXXVIIl/843-50

May 1967

-DAKAR _Mr.

A. NIVOLLET

INTRODUCTORY NOTE ON RESTRICTIVE TRADIDG SYSTEM

(1 )

Policy _relating to external finaneins v _{supposes a certain}

le .jure ^or de facto

dependence,

^which the planner must endeavour to lessen.

Policy aiming at improving the balance of trade, (2)

v '

implies industrialization. This latter _raises problems of choice between external and internal financings and leads to a certain de facto

interdependence.

Can we easily reduce the extent of such interdependence _by adopting specific measures aiming at channelling either external

financing,

^or industrial expansion, so that both factors lead more

effectively ^to the economic development of the country? This is the subject of FIN CON 50 dealing with restrictive trading systems.

I - Two _groups of measures are to be examined;

- effects and methods of Customs protection.

- effects and methods of direct control of exports and imports.

It is difficult to study the effects of protection by a customs

tariff, since customs protection is more or less combined with a sys¬

tem of restrictions on imports.

Therefore,

it is difficult to evaluat what is attributable to the one

(tariff)

^or the other

(quota).

1)

FIN PLA 70

2)

FIN PLA 40

IDEP/ET/XXXVIII/843-50

Page 2

II - Therefore it is not advisable to treat each measure se¬

parately. On the other hand, we may classify the African countries

into countries which are apparently "free-trade though protectionist"

and countries which are apparently "restrictive", although the manage¬

ment of bilateral aids obligés the latter to accept ^a certain "dosé' of

consumer goods.

Ill ^- Our approach will distinguish between trading mechanisms operating between countries with convertible currencies and those between countries with non-convertible currencies, specifying inci¬

dentally the "loopholes" used to escape the trading restrictions or unrealistic exchange rates. It is these underlying monetary mechanisms

and the policies which create the atmosphere in which a restrictive trading system will or will not flourish. Knowledge of the experiences of Mali and Guinea will be useful in this connexion. ~

IV - To form an idea

(summary

^{because it} is an overall

view)

of the efficiency of trade restriction _{measures, we} shall compare the impjort statistics of both groups of countries mentioned above

(protectionist

^—

restrictive).

SCHEDULE OF BOTES OUT THIS TOPIC OF STUDY

Classification 5*1 ; Spécifie aspects ^of customs control and tariff protection.

521 Clearing arrangements between socialist coun¬

tries

(non-convertible currencies)

53s Clearing arrangements within the context of a

convertible currency

("operations

accounts"

or "advance

account")

54s Traffic in currencies in Black Africa = de facto

clearing systems

55s The triangular operations

(loophole)

56; 'Cbmpensated trade" or use of a special rate of

exchange ^• • - —-

57s An example of ^a payments agreement between a

country with convertible currency and a coun¬

try with non-convertible _currencys Senegal-Mai 58s The comperative results of a few trading policies

very different from one another, and, conclu¬

sion .

V:: '

i

IDEP/ET/XXXVIIl/e4

3-40 Page 4

2)

Then we will

èxp'laiïï,

^riot empirically hut

systematically,

how-this policy was'used by ECLJt to'counteract the reduction in the 'cT-•■ import

capacity'

óf that continent in the 1950's.

3)

Next we will take the case of Brazil which is a vast country.

comparëblé1 to the Nest African region. In Brazil, such a policy was

suricéé-sfuí; for 10 years, but today it presents great problems. If the frontiers now existing between the States of West Africa were suddenly

to fall, would the_proocaa»s and results bo the same?

4)

^{As to} export

diversification,

one has to go very far and fish

in the China sea to find an example of interrupted success. We will look at the experiences of Taiwan

(Formosa).

:• r

5;)

Lastly, ^we will open a broad discussion on the application of those policies in Africa with exercises on Senegalese búsínèss enterprise

kí fori. ni r ■. . i ' : i ' ■ '---"t■" ,

rJ: coir;! ■•'uw

NOTES ATTACHED

0«i od .ill.: dridw roc • -lexer; v:;

FIN COM 41 - Note concerning

ICOTAF

tic;- • ■ Aar I

42 ^- Note concerning

West African Brewery

ItOGff horror 1 Lh~r- ben-v: ^{•. •} '• ■< •••' '' '•

43 - Note concerning

Lesieur Oil Works

rfj ^{:.. >*p} v;.di

is-dt

?J. tj «ififwaxh rte a — ..

44 - Note concerning.

Société Africaine de Raffinage

fff.j a. ; MJ ^- : r : ;v

ao -

Kv'Àrff

^h

. • .

;• i'vpf_

\

45 - Practical ex^rei-&ts- on

thesjs

case

studies

,o1rrv ^{- •} Î'iOVteCf'tl

•.".iiffl du? .ii.1

•.is,:.

aA~ a- Conclus ion-m áaapofrt. substitution

policies

;* ï>7f.+«.r■< Xr «r. - to — # .t.- . fv :cv;-ry,*■

^J-W.■' 4-J •■■/A* »V-•• • - •

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«! •"1 •!> •

:

.... 0 1' ^... -ijtPPe-'i !tj ?»:*, cëicri ^»SOO X'XO.'i.X'--.

■ t'.".' Û'V .1' '-J'JW vV/T. 'U.-iT- il! •";f'Kiv jjá tf-N.

.ÍI

^•

.roiil.: l. i-a/'O wtt ,Ii"o£o OV' I ' ài

■u ,, ■'M- ^.. ; ::.y< -■ . .1 .;;■ 1 >ítfc^iCÍO fM'1'.fiïOÏ cri* mû'r.-n Ut*

©V { f

•i-ix-hi" vitr.oIíí 'ytoáu ' t 0* os

jAoî'iîî'îvoo íjráwoX-iVõh edíMifc yjlf

r . •r.iiníiiach.i.-lyay»"! rir done

i-

•■•■! AW':i

i

idep/et/xxxviii/ p

'

3-4 o *

Page 3 "

5)

^{When it comes} to choosing new crops, about ten years, frequently elapse between the beginning of the research and the actual passing

through customs of new agricultural production

(see

example of Ivory

Coast).

6)

Some industria.1 projects for which the primary exporting countrie

would have a special vocation are those for which the consumption elastic!

in the industrialized countries is lowest

(textile exports).

These branches must therefore be regarded as if they were exports of primary commodities.

o Pits o ..

*•

. o o

II Doctrinal view point

- Either these 2 policies are envisaged in their narrowest sense, i.e. that the aim is only to reduce foreign dependency. In this light, import-substitution and export promotion policies are in fact policies

which result in the defining of investment criteria. They make it possible to choose, among various projects, the ^one which will be moot profitable for the balance of payments.

- Or these 2 policies are considered as elements of a more general strategy of development. These policies ^are judged and decided upon

according to their effects on growth. It is true that they are still used as criteria for investment choice, but the decisions ^{are no} longoi taken within the narrow framework of the equilibrium of the balance of

-L--

. "

payments but rather within that of marginal social productivity

(see Chenery).

o

III Experiences: Those successes recorded in the world which at times arc

brilliant, at others momentary, are useful to know about; for they enable

one to understand more clearly the case of Ifrica.

ï)

We will review the results obtained over the past 10 years by

some of the developing countries, so as to show clearly the positive results of such an import-substitution policy.

UNITED NATIONS

AFRICAN INSTITUTE POR ECONOMIC DEVELOPMENT AND PLANNING

IDEP/^T/XiXVIIl/843-SO

May 1967

DAKAR. _{Mr. A.} NIVOLLET

PIN. COM. 60

THE FOREIGN DEBT

^ ^

I now come to a vital factor in financial planning. It is fre¬

quently a source of

misunderstanding,

Because, as so often happend in economics, the financial flow elements

(short-term.)

and the "stock"

elements

(long-term)

^{are so} intermingled that the real effects of de¬

cisions are obscured. The "flow" element is positive in the short term

(e.g.)

the contracting of a loan means an inflow of foreign

exchange)5

it becomes negative a few _years later when we consider the servicing

of the debt

(e.g.

the interest payments and reimbursement of principal

are a burden on the budget and on the balance of

payments).

In the time- lag between the inflow of foreign exchange and the first interest payments, decisions are liable to be made which may .jeopardize the future, even

though they seem to be in line with sould financial policy.

Moreover,

while it is a wise measure to obtain from th© lending country a lightening

of the interest burden during the first few years of the loan, in the long term this concession becomes a highly questionable advantage.

1)

Read Goran Ohlin's Aid and indebtedness, from which the following

extracts are taken. Published by the OECD Development Contro, Paris 1966.

2)

Get to know the work of Amramovic

(of IBRD)

and read his Economic growth and external debt,Hopkins Press, Baltimore,

1964»

IDEP/ET/XXXVIIi/843-60

Page 2

I shall examine in turn:

1 ^- The dilemma of increasing debt

2 - The loan considered in isolation-structural study

of return flows.

3 - What happens when there

is

a

constant flow of loans

same analysis of return flows

4 - A steadily growing flow of loans - same analysis of

return flows 5 - The deht cycle

6 - The link between debt and growth

7 - Sow to test debt capacity and its relationship with

domestic financing. Exercise on Nigeria.

1, 5 and

6

will be studied in

documents PIN COM 61, 62 and 63

respectively. 7 will be studied in PIN COM

64

and in the answers it PIN COM 64 bis.

UNITED HATIONS

AFRICAN INSTITUTE FOR ECONOMIC DEVELOPMENT AND PLANNING

DAKAR. Mr. A. NIVOLLET

FIN. COM. 70

RATES OF EXCHANGE

I have studied the different facilities which may he expected

from an amelioration of the international system so as to bring about

an improvement in the balance of payments situation of underdeveloped

countries.

FIN PLA 70; Financing from foreign sources

FIN COM 10-20-30s The international chessboard and the

negotiations in progress.

I have dealt with measures of economic policy relating to import

substitution

(FIN

COM

4-0)?

restrictive trade

(FIN

COM

50)

and control

of the foreign debt

(FIN

^COM

60).

_However, we have not yet considered

the question of whether an underdeveloped country could not use other methods also in order to finance its plan properly or to attenuate the

pressure on its balance of payments, such as;

- refusal to use an over-valued currency, problem of devaluation

- practice of double exchange rates

- suitable use of payments agreements

This is the theme of the documents of Series 70 which will include;

FIN COM 71 Devaluations principles and techniques

FIN COM 72 Double exchange rates; advantages and disadvantages

FIN COM 73-74 Different kinds of monetary agreements and their application to Africa.

IDEP/ET/XXXVIIl/843-70

JUNE 1967

UNITED NATIONS

AFRICAN INSTITUTE FOR ECONOMIC DEVELOPMENT AND PLANNING

DAKAR

idep/st/xxxviii/843-6^

June 1967

Mr. A. NIVOLLET

FIN COM 80

TECHNIQUES OF FINANCING

Note on how the teaching

is_presented

FIN COM 81

FIN COM 82

FIN CON 83

>FIN

COM 84

How to make import and export forecasts for the end of the plan period?

Refer to document 568-5 and in particular study the accompanying diagram.

-How to link these forecasts of foreign trade with the overall fore¬

cast formulated for the last _year of the plan?

Refer to document 568-6.

-Let us try a practical exercise on Nigeria in order to "get our hand in".

Refer to document 572.93

(and

the answers to it

572.94)»

-Financing the plan presupposes an increase in the foreign debt$

the "debt capacity" of Nigeria has been explored in the series FIN COM 60. Let us try and find techniques to mitigate the infla¬

tionary consequences of an increase in the foreign debt.

Refer to document 572.96.

TOUTED NATIONS

AFRICAN INSTITUTE FOR ECONOMIC DEVELOPMENT AND PLANNING

DAKAR.

IDEP/ET/XXXVIIl/843-90

June 1967

Mr. A. NIVOLLET

FIN COM 90

TECHNIQUES AND PROCEDURES OF FINANCING

Introductory Note

In the course on plan

financing,

the problems raised by financing

from foreign ^sources have been studied _{in detail.} Trainees now know "who finances what and how".

However, it is not enough to know "where to go". The habits of the lenders approached must be known, since procedures vary according to the

source of aid and are often the cause of delay and mutual misunderstand- ings

(1)

v ^.

Three examples of "techniques and procedures of financing" are sug¬

gested to you:

FIN COM 91 ss The stand by credit arrangements of the International

Monetary Fund, because this procedure seems to be

becoming more and ^more important and because it doubt¬

less forshadows procedures likely to be adopted when the proposed "Development Insurance Fund (2)v is set up or when decisions are taken on the extension of interna¬

tional liquidity to underdeveloped countries

1)

Hence the role of aid consortia see FIN PLA 78

2)

See FIN COM 20

3)

See FIN COM 30

IDEP/BT/XXXVIII/843-90

Page 2

FIN COM 92; The systems of the World Bank and IDA, included he-

cause of the extension of their loan activities to Africa. IBRD_. procedures at the present moment doubt¬

less foreshadow those which will prevail if the Horovitz (1 )

plan comes into operation

FIN COM 93: The system of the European Development Fund, since these procedures are less well known to francophone countries

than are those of the French Fund for Aid and Cooperation, Furthermore, When ^a new agreement is negotiated next

year, the system may be extended to include anglophone

countries associated with the Common Market, like Ni-

•

(2)

geria

1)

See FIN COM 20

2)

See FIN COM 20