International financial and monetary issues : their implications for African trade and development

\

UNITED NATIONS

ECONOMIC AND SOCIAL COUNCIL

LIMITED

E/CN.14/AMA/40 E/CN.14/WP.1/63

6 August 1973 ENGLISH

Original: FRENCH

ECONOMIC COMMISSION FOR AFRICA

Third Regular Meeting of the Association of African Central Banks

Lagos, 20-24 August 1973

Eighth ECA/'OAU joint Meeting.

on Trade and Development Geneva, 9~17 August 1973

INTERNATIONAL FINANCIAL AND MONETARY ISSUES Their implications for

African trade and development

TABLE OF CONTENTS

Paragraph

INTRODUCTION ---

Economic Growth - - - . - - - 1-11 Balance of payments -.- - - 12-27

•External balance and international liquidity - - 28-36

FINANCIAL RESOURCES ---

The volume of aid - •- - - 37-46 The debt problem - - ■ - - - - -■ - - 47-57 Technical assistance - - - 58-65

MONETARY ISSUES - ---

Principle international monetary events 19.71-1973 - 66 - ?2 Impact of international monetary events on trade

■ and development in African countries - - - - 73-81 African countries and the reform of the

international monetary system ---82- 105 SUMMARY AND CONCLUSIONS ---

The flow of'resources - - - - The terms of financial flows and problems

of debt servicing - --- - The efficiency of aid -

The international monetary situation

- - 108 - 113 - - 114 - 119 - - 120 - 125 - - 126 - 137

Page 1 1-2 8-11

3- 8

12 12 - 18 19 - 25 26 - 32

33 33 - 34 35 - 40 40 - 47.

■• 48

49. - 50 50 - 51

51 - 52

52 - 55

M73-1841

f/cn,;4/aw/40 E/CN.14/WP.1/63

INTRODUCTION Economic growth

1. Economic growth in independent developing African countries was considerably- slower in 1971 than in the previous year. Their real gross domestic product

grew at an annual rate of only 3.7.per cent as against 5.5 percent l/* This

rate is also lower than that" registered in 1971 for the developing countries as a whole and the various"regions of the world. The average annual per capita growth rate of GDP was 0.2 per cent in 1971 as against 2.4 per cent in 1970 2/.

Table 1

regions of the world at

Developing countries Africa

Southern Europe East Asia' Middle East South- Asia

Western hemisphere Industrial countries Source: World Ban!:, 1972

constant prices

Total

■7-4 6-5

6.2 6.3 8.0 5.0 7.0 2.6 Annual Report

1970 GDP

Per capita 3.9 4.7 4.6 3.9 4.72.6 3.8

1-5

Total 4.6

6.9

7a 7.1 10.2 4-8 8.2 4.0

1971^

GDP

Per capita 4.2 1.8 5-5

4.2 7.0 2.4 v 5-0 2.9

a/ Provisional figures.

N.B. There are certain differences in the figures prepared for Africa by the

ECA and those prepared by the World .Bonk.

2. The short-term prospects for 1972 arid the difficulties that have arisen during this year would not suggest a higher growth rate. The rates of economic growth in African countries is in fact lower than previously -^iablished

averages.

3. The economic growth rcte in 1971 seems even more alarming when one considers that the First Development Decade ended with the African countries' growth rates being lower than the set target, with 4.3 per cent for the whole decade and 4.6 per cent for the years 1965-1970. The 1971 figures augure badly for the' Strategy for the Second Development Decade. Thus at the beginning of the

Second Decade, the situation is no better than it was at the end of the-First; it is even rather more critical. It falls well short of the minimum growth target.of 6 per cent laid down in the International Development Strategy adopted by the United Nations General Assembly. Since the achievements of the immediate past

1/ ^S^ce: ECA, Statistics Division.

■l/. Survey of Economic Conditions in Africa, 1972

e/c:t \/:/

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Page 2

under normal circumstances are good indicators of what may happen in the.

immediate future, the prospects for Africa during the Second Development Decade are- hardly encouraging.

4. Table 2 gives the average annual rates of growth of GDP of 41.independent

developing Afrioan countries over the last, decade and in the years 1970 and

1971. It shows a.general regression, "both in terms of averages by region, and by groups of countries, 'The results,of. 1971 year indicate that the

gap is growing appreciably wider. ■ ■ » . . • ■

5. The fall off in the average rate of growth of GDP experienced "friroughout all the. Eubregions of Africa in 1971 was particularly evident in North and

Centrr.l Africa. " . ....

6. The average growth rate in North Africa was greatly affected by the fall off in annual rates in Libya, Algeria and Tunisia attributable to a decline in the agricultural pr6duction rates in Li?oya and Tunisia and above all, to the decline in the minerals production rates in Algeria and Libya.

7. In Central Africa,: the fall off was caused primarily by the drop in the.

annual growth rates of Cameroon and Zaire and is attributable to a lower growth rate, in the services and industrial sectors in the two cotintries, and the mining sector in Zaire in particular;

8.' As well s,s the fluctuations in subregional rates, there are fluctuations in the achievements of the various groups of countries. The number of coun tries that had an annual growth rate of over 6 per cent in 1971 fell from 14 to 9 while the average rate for this group remained almost at a standstill. . The number of countries in the group with an annual., growth rate of less than ■"

1:9 Per cent in 1971 rose from 12 "fco 14? with a negative average that rose'

from -0.5 in 1970 to -2.2 in 1971-

9. The same period also witnessed mounting balance of payments difficulties in a good many African countries. Although the combined net position of exports less imports of goods and services,improved in Africa as a whole in 1970, it deteriorated in 1971 and many countries continued to show a

deficit in their external accounts. . ■ .

10. Africa is stili therefore heavily dependent on external assistance. Although the proportion of net domestic resources going into domestic capital formation

increased slightly during the last years of the First Decade to 16.8 per cent in 1969, this level was -still' 3,2 per cent short of- the target. In 197O(

the proportion of net domestic resources' fell to l6»l per cent., or 3-9 per

'cent short of the target, but■returned to the 1969 level in 1971 l/ This

situation shows that Africa's external relations will play a crucial role in the region's development during the Second United Nations Development Decade.

It also explains why African countries attach such importance to international negotiations on trade, aid and-monetary problems. ' ■

11. This review of economic growth gives an impression of the position African countries are in at a time when negotiations on international co-operation in trade, finance and monetary matters are in progress or are about to begin. The

following pages will identify the main new developments in these fields' during

recent years that ^re of interest to African countries,. ,

1/ Source; ECA Statistics Division,

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Page 3

Table 2 :■ Average, annual ri'.te of growth of the GDP of independent African countries

Independent developing African coun tries

Subregioh North Africa West Africa Central Africa East Africa' Group of cbun-.

tries

6 per cent and

over

5-5-9 per cent 4-4«9 per cent 3-3.9 per cent 2-2.9 per cent 1.9 per cent

and under .

at constant unit prices

. 1960-1970 ttunT-

ber of

coun

tries

-

41

6 14.

7 14.

11 4 10 3

5

8 x

Rate of in

crease

4-3

■

5.2 3.4

1.5 ; 5.8 '

8.83/

5.. 9

4.5 3,4 2.3, 0.5

196O-1965

"dum Kate ber of of

coun

tries

41-

6

"" 7

14

14 .

15

3 ' 3 4

5

11 Source: ECA Statistical Division

in crease

4,.

5-2 4*0

-1.3 4.9

/

5.5

4.3 ■ 3-6

2.5

-1.8

1965-1970 dum

ber of

coun

tries

41

6 14 7 14

12

5"

4

5

■7.

' 8

Rate cf in

crease

4.6

5.3 . 2.8 4-3 '.6.1

*

9.5^

5.6 4.4 - 3.6 2.4 0.9

. 1970 dum ber of

coun tries

41

6 . 14

7 14

14

3

5 2 3 12

Rate of in

crease

5.5

4.0

7.9

5-7

5.1

9.2 5.6 4.4 3.8 2.6 -0.5

1971 .. .

Num

ber of

coun

tries

41

6 14 7 14

9

7 2 4

5

14

, Rate of . in

crease

3.7

' ■ 1

6.2

1.9

2.5 >

4.2

9.3 ■ 5.6 4.1 3.42.6

-2.2

a/ The Libyan Arab Republic is excluded; the average rate for this group falls

to 7.2 in 1960-197O.

Bclance of payments

12, Looking at the statistical picture-, one is impressed by a fact that is' central to the balance of; payments of most African countries: There has been a deliberate effort to accelerate the pace of socio-economic development and reduce the chronic deficit in domestic resources to meet financing requirements. Inflows of external capital and aid are necessary to ensure fixed capital formation, but these inflows give rise to;deficits on the current account. .. ...

13. The exceptions to this general rule ere few. They are, however, important in the combined balance of payments position of developing Africa. The balance of payments summery for I969-I97I shows., that the overall deficit on the

current, account was in many cases reduced or wiped, out as a result of develop ments on the merchandise account "of a limited number of African countries.

■ The volume of capital inflow produced an overall balance of payments surplus.

In 1970 and 1971r this surplus' reached 1,000 million US dollar's-in spite of deficits of one million and 700 million US dollars respectively; on the current account.

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Table -3 -: ^ i a'12^LJ2L£^^^^ Africa, 1969-1971

(in million US dollars)

Merchandise account

Services and private transfers Current balance

Capital balance Allocation of. SDR'.s Overall balance

19>

2

—2

0

0

69 • .6

-"7

.8 .8

1970 .2.3

■--2.-5

-0.1 1-.-0 , 0o2 . 1,0

■1971 , ■ ~

-2.2

1.5

-0.7 1,6 oa 1,0 ■

Source; IMP AESiEiLJlSESEll 1972.

14= Table 3 summarizes the main balance of payments data for developing Africa (1969-1971) in US:;SlT000 million. Generally speaking, fluctuations in the overall balance were reduced and showed a slight improvement, whereas the fluctuations were mere significant in the current and capital balances. The overall

balance was particularly affected during the period in question by the net

deterioration in the merchandise account. In 1971, various factors; including

in particular the application in certain African countries of expansionist

budgetary and monetary policies and the cyclical drop in the prices of primary products and certain goods, were largely responsible for accentuating the weakness of the current account. During the past three years, however, the overall bal

ance . has remained positive: There was an improvement in ihe order of 25 per cent in 1970 as compared to 1969f while there was hardly any change between 1970 and 1971-

150 Compared with the overall balance of the developing countries as a group,

Africa's balance denotes a particular weakness. Whereas the surplus in the group's overall ■balance increased by 200 per cent from 1969 to 1971: that of Africa increased b;y only 25 per cent. Whilst in 1969'it accounted for 53

per cent of the overall balance of the group, the figure fell to 22 per cent - ■

in 1971.

16. In developing Africa, as in the developing countries as a wholer the improvement inihe balance of payments surplus is entirely due to the increase in net inflow of capital which also offsets the constant deteriorations in the

merchandise account and the current balance. Nevertheless, the capital balance in developing Africa appears modest, representing only 12 per cent of that

for all developing countries.

17. Table 4 summarizes the balance of payments situation in 22 developing African countries l_/in the years 1969-1971 and the fluctuations in their

reserves in relation to movements in the balance of payments items- It makes it

possible to compare the averages for the last Wo years of the First Develop ment decade and the figures for the first year of the Second Decade,

1/ The 22 countries are Algeria, Chad, Egypt, Ethiopia, Gabon? Ghana,

Ivory Coast, Kenya, Libyan Arab.Republic, Kalawi, Mauritius, Morocco, Nigeria, Sierra Leone, Somalia, Sudan, Tunisia,'United Republic of Tanzania,"Uganda, Upper Volta, Zaire and.Zambia.

Table 4 : Balance of payments summaries for 2

-

- ■ Exports (f.o.b.) Imports (f.o.b.)

Trade balance

Services transactions Financial receipts

Debt'amortization and invest ment income

Other transactions Allocation of SDRs

Variation■ of reserves

■

1969

9.6 6.8 2.8 -1.7 1.7 1.7 -0-3

-

0.7'

■ ' E/ 3/CN^/AMA/4O-- 'CN.14/WP.1/63

2 African countries, 1969-1971 (in' U£

Average 1970

10.4 8.1 - -1,82.3

2-2 . -1.3 -0.3 0,2

0.9

1969/70

' 10.0

■7.5

2.6

-1.8

2.0 -1.8 -0.3

—

0.6

3"3l»OOO million)

1971 11.0

9.41.6 -1.6 ■

2.8 -2.3 0.2 0.1

0,9.

\

. 1

Source: UNCTAD, "The recent eeouomic experience of developing countries in relation t-o the goals and objectives of the International

Development Strategy", TI>/b/4 29/Add. 2. '. . .. '

18. In 1971* the absolute value of exports and imports increased in comparison with the average for the years 1969-1970,. but^although there, was still a sur

plus on the trade balance, it was reduced. Gross financial revenue (public loans and transfers and long-term private capital) rose by $8 million, but

the increase was largely offset by rising payments for debt amortisation and investment income (net payment of interest and earnings on direct investments).

Other operations, which related primarily to short-term movements of capital, current operations and unregistered capital; provided an extra $2 million.

As a result of all these factors, there was an increase of one hundred thousand dollars in. foreign exchange reserves,

19. Table 5 gives the data available on the balance on the visible and in visible accounts of certain African countries for the period 1969-1971- These

data show the trends for current.accounts (goods and services), transfers,

capital and the overall balance of payments.

20. In Africa, as in other areas oi the world, appreciable fluctuations in) trade balances have been one of the major features of the'pattern of trade during the period 1969-1971. For the continent as a whole, the value of exports rose from 512,600 million in 1970 to $13*400 million in 1971, an increase of only 5 per cent,while the value of imports rose from $11,100 million to 'i?13,100 million, or an increase of 18 per cent. In 1972 exports rose.to 5l4j8OO million and imports to $14»6OO million, an 11 per cent increase over the 1971 level.

21. ■ During 1969i "the increase in the value of exports was partly a result of the rise in the prices of primary commodities, which produced an improve ment in ths terms of trade; . In 1970,there was a deterioration of approximately 2 per cent in the terms of trade of the developing countries as a -whole.

In Africa, the deterioration in the terms of trade was more noticeable in

the order of 6 per cent compared with 1969. In 1971, the African economies

suffered from the serious events .that slowed down trade throughout the world.

Some of .them, such e.s rannetpjy adjustments and the rate of inflation in the developed countries, had repercussions on.overall prices and demand and, by extension, on the total value of African exports and imports.

i' V . r.

Balance on visible and invisible accounts for selected African countries, 1969-1971

(inmillionUSdollars) CovntryYear

Trans-Invest-Netbalance Tradeportandmentongoodsand balanceinsuranceincomeservices.TransfersCapitalBalanceof payments

OO PrivatePublicPrivatePublicposition Algeria Ch?d Egypt Ethiopia Gabon Gho,na IvoryCoast Kerrya LibyanArab Republic Malawi

1969 1970 1971

1969

1970 1971 1969 1970 1971 1969 1970 1971 1969 1970 1971

1969

1970 1971 1969 1970 1971

1969

■1970 1971 1969 1970 1971 1969 1970 1971

-51.0 -65.O -172.0 -1-5 -1C9 -227-0 -374.0 -394,0 --10.2 -21.4 -32.7 66.7 .76.9 ^58.2 87.7 -13.9 111.0 64. 47.

-86.8--^

-140..9f/

-247.2?

V

1398.1

1725.0-y 1680,0^

-21.4 -25.1

-69,0 -107.0 -86.0 -15.9 -1-3.8 -5.0 -9.0 -7.0 -9.1 -11.6 -12.8 -19-3 -18.9 -45.1 -45-4 -46.7 •** .*e ■■« •*. .■*

-228.0 ■112.0 -57.0 .c'e 0*0 -8.1 -7.7 -11-7 -36.7 -40.3 -41.7 -39.0 -37.0 -43.0 -26.6 -32.2 -40.1 -456.0 -464.0 -440.0 -7.2

-8.7

-443.0 -325.0 -357.0 -28.0 -26.0 -304.0 -462.0 -486.0 -20.8 -39-6 -49.4 -15.9 -4.7 -36.7 -15.1 -120.3 37.0 -22.0 -54.0 -30.8 -71.8 -174.4 490.0 893.0 956.0 -47.9 -49.6

215.0 187.0 204.0 1.3 3.0 8.0 4.0 11.0 -3.0 -2.6 -1.8 -5.2 -6.6 •13.2 -11.8 -8.2 -36.0 -43.0 -47.0 2.5 1.1 3.1 -44.0 -45.0 -47.0 2.0 2.1

22.0 12.0 91.0 17.9 24.2 288.0 304.0 268.0 .14.2 10.6 10.0 9.3 11.2 0.9 0.5 0.5 20.0 31.0 34.0 20.2 24.3 20.7 -118.0 -113.0 -90.0 16.5 13.7

30 47 8 2 1 -15.0 -15.0 -13.0 3.6 15.0 18.0 .7.9 -5-3 9.0 ■18.8 77.0 1.0 33.0 1.0 39.5 61.5 27.5 137.0 172.0 52.0 14.9 2.0

43.0 14.O 89.O -0.6 2,8 »66.O 19.0 39.0 9.2 2.0 13.0 4.0 6.7 -45.4 45.4 29.3 26.0 39.0 49.0 17.6 22.7 34.2 -17.0 -8.0 15.2 35-6

-133-0 -65.0 -35.0 -6.8 5.3 -89.O -150.0 -181.0 3.8 -14-6 -10.2 0.1 1.3 5.4 37.8 -21.7 48.0 38.0 -17.0 49-0 37.8

-88.9

448.0 907.0 811.0 0.7 .3.8

O\O

Table5Balanceonvisibleandinvisibleaccountsforselected Country Mauritius Morocco Nigeria SierraLeone Sudan Tanzania Tunisia Uganda Zaire Source:ECA

Tear 1969 1970 1971 1969 '1970 1971 1969 1970 1971 1969 1970 1971 1969 1970 1971 1969 1970 1971 1969 1970 1971 1969 1970 1971 1969 1970. 1971

Trade Balance 7cO 5.0

-8.7

-33.0 -137.0* -137.0

233.5^ . 243. Of,

396.CP 6.62/ -1.9 -4.4

2.3^ -16*9^

5a

-77<Oa/ -107.0-'

-91.0 -111.0 -120.0

-3O.4"'

278.0 256.0 secretariat.

Trans portand insurance -4.6 -7.7 -7.5 -29-0 -39-0 -38.0 a•a -10c0 -10.5 -10.r •*t 0e1, .*. -25.0 -22,0 -15.0 ... -67-0 -84.O

Invest ment income c.a• ... cot 0*c 00e -154-0 -156.0 -452.0

-7.4 -8.0 -9a -14.7 -14.9 -13.2 2.9

-3.5 -2.9 ^..

I. -17.5 -15.0 -20..8 ...

Netbalance ongoodsand services 5.0 3.9 -9-9 -8£,o' -197.0 -16c.0 -181.1 -133.0 -264.O 14o

-23.2 -25.6 -27.7 -42.2 -39.7

-47-5

-71.C -88.0 -97.0 -30.0 -3-6 -25.6. -68.5 62.0 -10.C

Transfers Private 0,3 1.4 1.-7 58.O 69.O 106c0 5.6 19.0 1-3 1.8 2.4 -0.6 -1.2 -0.9 5.6 10.6 5.5 8.0 7.0 15.0. -4.9 -6.9 -6.1 -63.0

Public 2-3 2.5- 2,8 11.0 4.0 3.0 23.5 44,0 27-0. 3.0 1*5 -1.4 3.0 1.8 1.9 32.0 31.0 21.0 2.5 1.5 1.9

47.0 57.0

(inmillionUS Capital Private 2,8 0,8 ■1.5 -7.0 55.0, 31.0 109.7 112,0 318.0 16.3 17.4 ■9.7 0.8 0.9 -4.3 10.6 9.8 -1.6 23.0 40.0 51.0 -6.4 -36.2 -5-8 7.0

Public 1.3

-o"3

39«O 89.O 87.0 5.1 16.0 33.0 2.2 2.2 3.6 '34.2 2.3 6.7 _{10.7 64.2} 101.2 39-0 31.0 23.0 23.8 14.8 41.1 -9.0 12.0

dollarsj__ Balanceof payments position. 11.7 7-9 -4.2 19.0 20.0 -37.2 58.0 ■69,0

8.5 1.5

-6.4 5.4 -38.7 -39.6 42.4 38.9 35-4 14.0 12.0 80.0 11.2 -1.0 -37.8 37.0 -3.0

a/ Imports and exports c.i.f.

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22. In I97I, of the 19 countries shown in table 5, five had a surplus in their trade balance as against 8 in 1970 and 10 in 1969. Generally, it can be -noted that the deficit had been increasing during the previous two years and as a result the overall surplus on the merchandise accounts of African countries was declining. The trade balance surpluses of developing Africa have been con centrated'disproportionately in the hands of a few 'major exporters! notably of petroleum and minerals. The surplus balance on the merchandise account of the Libyan Arab Republic alone exceeded the overall African surplus in 1970 and 1971.

23. Of all the countries listed in table 5, only one -.Libyan Arab Republic - had a uc on the goods end services account in 1971 as' against three in 1970 and six.in I969.

24. The data relating to transfers and capital show deficit financing in the current account or the use of surpluses in this account. In r.iost African countries," private- transfers generally -show debit balances, primarily as a result of the repatriation of funds by wage-earners in the private sector, A few countries, however, with a large number of nationals employed.abroad, have e. net inflow' of private funds. Public transfers are generally positive.; They include, in particular, technical assistance and grants in cash and in kind from foreign Governments and international organisations. ;

25. Capital balances, both private and public, are generally positive. They are credited with the balance of the differences in commitments in the form of direct investments, long- and short-term private capital and draws on loans from Government or international organizations. It should, however, be noted that the flow ■ of capital is irregular, particularly in the case-of private

capital. : . J

26. The net balance of payments was positive in 1969 in 15 of the countries included in table 5, in 13 in 1970 and in 5 in 1971. This.indicates that transfers and movements of capital have a very significant influence on the balance of payments of African countries. A number of countries with deficit balances on current account had cm improved or even surplus overall balance of payments position. Balance of payments surpluses tend to be less.con;- centrated than trade balance surpluses.

27. Trade balance difficulties end the generally negative balance on current, account are a basic and almost permanent feature of the balance of payments of the majority of African countries. Consequently, one of the main objectives of these countries is to find external,resources which can remedy the imbalance

in their payments position0 „ .- ' . • .:

External balance and international lictuiditv - ■

28. The provisional figures indicate that at the end cf 1972 the African coun-

tries as a whole had a trade surplus of US8248 million. The 1971 figures also revealed a very small surplus of 3299 million as against m,487 million

in the previous year. . '

29. Overall reserves-of the African countries have nevertheless risen continual ly over the last three years. Table f. shows the trends c-,nd fluctuations in the trade balance and international liquidity of African countries., ■

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Table 6 ; Balance of trade and international liquidity of African countries

....'.., .. :" (in US$ million) .._

Balance of trade^ _Jetc hang^ n_reserves- 1970 - 1971 19.72 . . . IQ70 1971 1972 Africa ■ 1,487 299... 246. . 1,102.1,319 473

^ L971 - 672 l,O76 259

Source: IMP, International Financial Statistics, June 1973 a/ Sxports f.o.b. minus imports c.i.f.

' b/ Gold, convertible foreign exchange, reserve position in IMF and SDR's 30. International liquidity of all African countries for which data are published in IT.IF's International Financial, Statistics stood at US:M,J40 million in 1970, rose to 55,660. million at the end of 1971 and reached 36,130 million at the end of 1972, which represents an increase of 30 per cent in 1971 over the end of 1970 and of 8.4 per cent in 1972 over the end

of 1971. However, if the figures for Libyan Arab Republic are excluded, the rates of'growth fall to 9 percent in 1971 and.7 per cent in 1972. A better comparison of

liquidity trends can be made if they are expressed in terms of Spscial

Drawing Rights (table 7). There is then a 20 per cent increase in liquidity in 1971 as compared with the end of 1970 and an 8.4 per cent increase in

1972 as compared with the end of 1971<■

Table 7: Tn-hpr^i.i nriaTlimiiditv^ of African countries

Year- million US dollars . million SDR

1969 '3,240

1970 :'4,342 4,342

'1971 . 5,661 5,213

6,134 5:652

1972

Source: IMF. International Financial Statistics, June 1973

31. Tr.ble 8 summarizes the changes in international liquidity of 34 African countries in recent years. There was v. sizable increase in 11 good many of them in 1972. Thirty-one out of the 34 increased over their levels 1969 and £ over their 1971 levels. International liquidity, suffered in a few countries in the last two years, and considerable drops occurred in Cameroon

and Zambia. - . .

32. Comparing the 1971 reserves and the 1972 GDP, only 12 countries had

international liquidity in excess of 10 per cent of their gross domestic

product. In 10 countries, the rate was lower then 5 P©r t

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\V

TflVilR 8- Changes

Algeria Burundi .

Cameroon

Central African Republic

Chad Congo Dahomey Egypt Ethiopia Gabon Gambia Ghana

Ivory Coast Kenya . .

Libyan Arab Rep.

Madagascar Malawi Mali

Mauritania Mauritius Morocco Niger' Nigeria Rwanda Senegal Sierra Leone Somalia, Sudan Togo Tunisia

United Republic of Tanzania Upper Volta Zaire•

Zambia Total

5 in international

-

Million dollars

'493

19 44 2 10 : 10 28 . 149 93 23 12 107

87

£04

2,925 51

36

■ 4 13 70 237 41

385

6

38 ■ 46 3136 ' 36 223 12 47 181

5,874 ifi

liauiditv of

In percentage of liquidities at the

1969

120.2 271.4 -

91.7 200.0 L,000.0 166.6 350.0 102.8 129.2

287.5

200.0 140.8 122.5 120.0 318.6

268.4

171.4 400.0 325.0 212.1 207.9

585-7

285.2 200.0 475.0 131.4

238.5

100.0

138.5 602.7 ' 150.0

204.3 91.0 44.7

end of

1971 . 97.4 105.6

59.5

-

90.9 90-9

112.0 136.8

92.5

92.0 109.1 237.8 97.8 119.2 109.8 ,

■ 113.3 112.5

162.5 66.7 134.6

136.2 120.6

89.1

75.0 131.0 121.1 119.2 128.6 90.0 15Q.7

200.0 109.3 123.1

58.5

selected African countries

In percentage In percentage of GDP in

1971.

11.3 8.6 . 4.2 1.0 3.2 4.0 10.1

1.9 .

.. 5.0 6.2

24.5

4.0 11,6

5.5

69.2 5.3 9-4 - 1.4 6.0 .34.0

6.5

11-4 4.3 2.6

5.1 9.9

12.3 1.8

12.5

13-9

. .8.6 14.2 8.0 10.1

of imports in 1971

* * *

1

63.3

17.6

' .5.7

16.1 - . " 12.7 36.0 16.2 49.5 23-7 46.2 24.721.8 39.5 ' 417.3

23.9 33.0 22.87.3.

84.3

34.0

75.9 25-5

18.2 17-4 ■ 40.749-2

10.1 51-4

■ 65.2

35.5

92.2

...

26.4

E/CN. 14/AM/40 E/CN.14/WP-I/63

11

33. The relation between 1972 reserves and 1971 imports was more than one- third, or four months' imports requirements in 16 countries. It was, however, particularly low in such countries as Mali and the Central African Republic,

which had reserves for only one month's imports.

34. Table ^ sets out the structure of Africa's international liquidity. It

shows clearly the preponderance of currency in the composition of the liquidity.

In the period 1969-1972, currency consistently accounted for over 80 per cent of total.international liquidity, a fact which has noticeably affected the total liquidity of the African countries in view of the recent monetary adjust

ment S a

Table 9 : Structure of Africa's international liquidity.

Gold Foreign Reserve in IMF SDRs

Total Source:

1969

Amount Per cent

513 15.8

exchange 2,617 80.8

position

110 3-4

3,240 - 100.0

1970

Amount Per cent 493

3,564 183 l'O2

4,342

11.4 82.1 4.2 2.3 100.0 IMP, International Financial Statistics,

JLia.

^million

1971

Amount

4

5

June 532 ,716 192 221 ,661

Per oent 9.4

83.3

3.4 3.9

100.0 1973.

dollars) 1972 Amount Per

. 532 8.

5,076 82.

213 '3.

313 5;

6,134100,

cen

7

7 5

1

.0

35. The role played by Special Drawing Rights (SDR3) is negligible. Thirty- nine African countries received SDRs amounting to '8193 million out of a total allocation of S3,414 million in the first year of the scheme, $168 million out of a total of $2,949 million in the second year and $168 million out of a total of $2,951 million in.the third year. These amounts represent less than one-third of the allocation for the United States of America alone and . slightly less than what is allocated to the Federal Republic of Germany. The total of the three allocations was largely wiped .out by the deterioration

in the terms of trade for Africa in 197CKJL/. .

36. Special Drawing Rights can be used to obtain covertible currency from other participants in the scheme. African countries had used only 216 million SDRs out of their total allocation of 529 million up to the end of 1972.

l/ Estimated as a loss of US$ 20 million,

E/CN.14/AMA/40 E/CN.14/WP.1/63

Page 12

FINANCIAL RESOURCES The volume of aid

37. Official net financial flows from-DAC countries arid.multilateral'"

agencies to Africa in 1960-1966 amounted to an annual average of.

$1,669.01 million, declined to $1,608.76 million in 1967-1969, recovered in 1968-1970 and rose to $1,801.96 million in 1969-197'- The .rise in

1969-1971 was due to a significant increase in multilateral aid, the annual average of whichVro'ew !to $425.47 million in 1969—1.971 against. .

$322.57 million in 19<S8-197O and an average of $168.91 million during :

the, period- 1960-1966. ■ While. Africa's share in tbe total official net

.flow of external financial resources from EAC countries and multilateral

;age£cies:declined from 28 per cent during the first half.of the 1960s.

^" cent, during tho second half "of the decade, there hae. "been-a., -

Afi' h i

^o.22per cen rig ,

slight,relative improvement in more recent years. Africa's share is

still ^significantly lower than it was at the beginning of the 1960s, „ ; J ..

' ■■ .

.38. Only a very small number of DAC countries have consistently increased their"official bilateral assistance during the'last decade. There was, .,

■n;oweve>,: a general increase in assistance from most donors from 1970 to 1971 This increase still.left assistance from three of the main donors - France,

"United Kingdom and United States;of America V far below what it had been in

the first half of the 1960s.! Together these three countries accounted.for

66 per -cent of. the total flow of bilateral resources in 1971 as compared .

with" 85 per .cent in the first half-.of the last decade. It is worth'noting that, in.1971, for the first time bilateral assistance from the Federal:;

Republic of^Germany.was greater than that from the United Kingdom. ■

Table 10 : Total official net flow of external resources to developing ■■ /

■ ,■■■ regions from DAC countries-and multilateral agencies: annual average-7

Million US dollars Total

Regions ..

Africa

3urope

Latin America

Asia

1960-1966 1967-1969 1968-197C

1969-1971

1960-1966

1967-1969

1968-1970

1969-1971

1960-1966

1967-1969

1968-1970 1?69-197T 196O-1966

1967-1969

Bilateral ■

1,500.00 1,354.70 '

1,346.54 ; 1,376.49

419.09 324-35 336.40

■ 189.47

739.10

956.35 984.43 . .

■ 844.30

1,869.56

3,197.00

Multilateral

168.91 254.06

• ■ 322.57

425.47

33-57

106.99 118.90 127.14 . . 143.06 299.43

395.64 600.33 ■

232.72 351.97

Million ' . US dollars '

1,669.01 ' 1,608.76 1,669.11 1,801.96 452.66 431.34 455.30 316.61 882.16

1,255.78 1t380,07 1,444-63

2,701.27

3,548.97

Percentages

27-8 21-9 22.0 . .

23.9 7.5

5.96.0 4.2

. ' 14.7

17.118.2

19-1 —._

44.9 48.3

E/CN.14/AMA/40 E/CN.14/WP.1/63

Page 13

Table 10 -1 'Total official net flow of external resources to developing , regions from DAC countries and multilateral agencies; annual average-^

(continued) "

Regions Million US dollars Total

Bilateral Multilateral Million

US dollars Percentages

Asia (cont'd)

Oceania

1968-1970

1969-1971

1960-1966

1967-1969

1968-1970 1969-1971

3,208.18

2,915>27

105.07 190.02 228.06 251.28

331-77 470.35.

O.76 3.32

4.69 6.53

■3,539-95

3,385,62

105.83

193.34

232.75

257,81

46.7

44.8 1.8 2.6 3-1 3,4

Total (unallocated 1960-1966 5,419-92 included) 1967-1969 6,318.81

1968-1970 6,381.52 1969-1971 5,896,48

598.89^/

1,035-17 1,196/12

1,654-69

6,013.81

7,353.99 7,577.64 7,551-17

100.0 100.0 100.0 100.0

Source 1 OBCD Development Assistance Efforts and Policiep - 1970, 1971 and 1972

Reviews.

a/ Bilateral flows net of loan repayments; multilateral flows not of loan

repayments, grants and capital subscriptions and net official purchases

of bonds, etc. by developing countries.

b) Totals exclude figures for African and Asian Development Banks.

Table 11: Total official bilateral not flow of resources from DAC countries to Africa 196O-197Oa/: annual average (million US dollars)

I96O-I966 1967-1969 1970

1971

Australia Austria Belgium Canada Denmark

France h/

GermanyFfederal Republic of Italy

Japan

Netherlands Norway Sweden Switzerland United Kingdom

United States.of America

Total _^

Sourcei OECD Development Assistance, 1970, 1971 a/ Net of loan repayments

b/ Includes $58.24 million and $118.26

and department in 196O-1966 and 1967

0.3;

1.27

75-78 5-85

0.62 636.10

59.57

38.18

0.35

0.73 0,62

3.58 193.84

0.93 444,31

0.94 2.40

66.54 26.35 518.03 8.59

110.13 70.08 8,10 10.43 6.9O 20.66 5.O5

156.93 296.33

53I

1.50 0.90

78.45.

51.28

19.99

533.90 120,79

43.59

■ 12.85

8.45

24.617.53 125.04

6.35

254.00

1.30

86.63

4.33

84.4B 18,49

56O.6O

131.59

36.70

12.77

17.05

9.70 26.06 4.87 127.62 312.00

and 1972 Reviews

million to overseas Territories

-1969 respectively,

E/CN.-i4/AMA/40 E/CN.14/WP.1/63

Page 14

taken of

of MC of DAC

data f°r 1"1 as shown in Table 11 have been calculated at current

+\ ThG PlCtUre WUld be differe"* -f account wKe ■

that have occurred on the price front and., on the currency

the OECD 1972 Review, it- can.be deduced that the impact of

^ ex^-ge ™*e Ganges during 1971 on the. total volume ies assistance to developing countries was..in the order of " ■

+6,pr:°es of Manufactured goods entering international trade

°Thi SeT Jk I91-' than the—Se prices during the -period ' tft " SPlte °fthe ^nificant increase in the current

Mlateral resources in .1971, the real value was probably

age for the beginning of th 1960

„! ateral resources in .1971, the r -far below the average for the beginning of the 1960s

,40. The distribution of financial resources committed by the Socialist

countries is characterised by a high degree of concentration at the "

=country level. The share of Africa accounted for 34.8 per cent of total commitments by Socialist countries during'the period 1959 to 1969. The bulk of the commitments by Socialist countries- to developing countries

^as concentrated in Asia. Egypt, which has been the main recipient bf

such aid in Africa, accounted for 50.1 per cent of Africa's share and 1V

Per cent of the grand total during the period 1959-1969. It is kttidli

to assess to what extent bilateral commitments of the Socialist coontrW

have been carried cut. It is understood that the percLtag \f delivery

varies considerably from country tc country and from year fo year l because of xhe fact that most commitments are hil/^S

41. In 1970 commitments from Socialist countries in the form of bilateral economic assistance to developing countries:;-more" than doubled- in -relation to the commitments made in 1969,. rising from.$776-million tea total of

Vo'IIa? ^°n ^1Oa S Shar° incre^^ appreciably from S184 million

to S642 million, ^'he markadincreaee in .commitments to Africa is

attributed mainly to commitments from the People■s Republic of China

railway?* aPPr°XmaU1* $4°5 millio" f" *"■ conetraction of the Tan-Zam

42. Available informatio obtained considerable

g^" re°\1Ved oredits Soviet Union totalling about

OECD Development ^sistance. 1972 Review p. 86.

E/CN.14/AMA/4O 'E/CN.14/WP. 1/63

Page'15 Table 12i Socialist countries* commitments of "bilateral economic assistance

to the developing'countries (in million US dollars)

Region and ' 1965 1966' . 1967 1968 . .'1969 1970 Total 1959- Percentage

country \ . • ■ 1970 of total

AFRICA

Algeria - '. - 170 - ' ~ 60

CAR _-_,_ _ _

. Congo

Egypt ' " . ■"■ 126 - '*-'* 120' 168 : 38 103

Ethiopia Ghana

Guinea- -• ■ "3 - - - 92

Kenya Liberia Mali Morocco

Nigeria ■ '■ ■ Senegal

Sierra Leone Somalia

Sudan .. . . - ' 10 - 53 ■■ 74

Tunisia - - 7 . 55

Uganda 30

United Republic . ' ; ■

of Tanzania - 26 _ ■ . _■ -; - 202 279 6.43

Zambia . - _/__ _.- ;.- - ■ ■ ■-"■' ■ 203 ' 203 4.68

Africa total Latin America Asia ...

Total ■ 646- 1,313 621 ■ 758 776 M,694 12,304 100.00

Sources: 1965-1966 United Nations document E/4495.

M967 United Nations document E/4676.

■1968-1969 United Nations document E/4823. - * 1970 " United Nations Yearbook, 1971-

126 :29-

20-

—■

—

14 28

_

—

—■

....— ...

"3 ■

■11

—

*- ■

."■

6

_

. . —

120

—

—

»*.

19 100

I

—

10 7

529 624 1,953 129 188 194

66 ■ 3 93 36 114

287 ■ 110

183 -

109

45

12.20

■ 0.09

■ 1.43 45.05

2.98 4.34

4.48 1.52 0.07 2.15

■ 0.83 . 2.63

0/16 O.65 2.54 4.22

2.51

1.04

247 364 15

¹

46.

100

,167 ..

420 107 94

223

■ 20

51.5 ..

184 ■ 55"

.537...

. 642 92 ■

.. 960.

4 .7

,335 .

957 ,012

35

7

-57

.23

• 77 ..00 .

E/CK.14/AMA/40 E/CK.14/WP.1/63

Page 16

43. Aid from multilateral agencies is playing an increasing role in the to.tal flow of .'.financial, assistance to Africa.- . Its ratio -to. the total inflow of official assistance from DAC countries into the African region rose from about 12 per cent in i960 to about 33 per cent in 1971* However, although the multilateral flow to African countries rose- from-$1.^8 million

in I960 to $497 million in 197^ * its share in total assistance fiom

multilateral agencies to all developing countries declined" from about 55 per cent to about 25 per cent" during"" t'tie' same period".

Table 13 : Flow of resources from multilateral agencies to developing

regions (net disbursementsin percentages and million US dollars)

1960 1961 .1962 1963 1964 1965 <966 1967 1968 1969 1570 1971 Africa 54-6 54.5 35-0 17-5 25.6 27.1 24-5 21.4 33.1 27-3 25.5 24-8 Latin America 3.7 -21.8 16.7 44-9 43.3 19.7 27.3 32.3 27..9 30.3 40-9 ' 36.6 Asia / 35-0 55-5 46.6 32.8 29.3 52.2 43-6 42.4 35.8 31.0 24.3 30.0

Total^- 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100,0 100.0.

Total .

289.7 224.3 414.4 638.4 724.8 799.3 780.2 960,4 768.5 1353.6 1609.1 2001.46 - Source: TD/i18/Supp.2, Annex, Table 9t and OBGD 1Q72 Review table 20 (for

1969, 197Or 1971)

bJ Includes unallocated disbursements and flows to.Europe and Oceania.

44 • In 1971 the European Development Fund (FED) was the biggest '■;

multilateral source of'assistance to Africa, accounting for US$176,34

:million or- %% per-- cent. of tota-1 multilateral aid to Africa.-

a/ ■

.Table 14t Total multilateral net flows to Africa-7(in million US dollars)

IBRD IDA IFC ADB

EEC (FED)

UN

Total

.1960-1966- - 52.10 -O.57 2.67

59.18

55-53 168.91-■

.1967-1969- - 27.89 43.31 7.40 -21.81

107.60 89.68 254.O6

Averages 1968-1970

13-62

56.77

9-62 -8.32 -■ .

125.17

125.46 322.57

Source: OECD Development Assistance - 197Ot

' -1969

45-07 61.64 -

12.86 .. -7.80

119.75

138.06 369.58

1971 and

1970

39.39

68.57

10.11 ' - -1.97

150.11

143.45 "

409.66

- 1971- ■•- -

1O5.57- . ' •"

73.21 1 .00 . -11.92

176.34

146-80

497. i8

1972 Reviews.

a/ Net of loan repayments, grants and capital subscriptions and net official

purchases of bonds by African countries*

~b/ Excludes cumulative disbursement of -39 million dollars. Negative

figures reflect inflow as. Bank's capital vjtis constituted.

45» In the first European Fund™' covering the period 1958-I963

$581 .million was available for financing various development projects in--associated countries and Territories. Under the First Yaounde

. Convention the Second European Development Fund was established for the period 1963-1968, Trtal resources available in the Second FED rose to $800 million, of which $730 million was allocated to the African Associated States, under the Second Yaounde Conventionfth^ amount

of-aid to be extended to the Associated States from the third FED amounts to $1,000 million, of which $9^ million will go to African Associated States. The- components of the 3rd FEDa^e shown in Table 15 below.

Table 15 ; Aid components under thaTbird European Development Fund (in million. US dpllaTsT.

Special Loans from the European

Total Grants * Investment Bank

Recipients leans

African and Malagasy q1q ■ 71o «r 90

States - '■LO (4° " 7

French, overseas departments and

territories ... ,. .. ... 41 . . 30 o . 0

Netherlands overseas

Territories 41 32 4 5

Total 1000 810 90

46. Total lending to Africa from the World Bank and IDA reached 8581 million in'the 1972 fiscal year, but there was only a fractional change in the share allocated to the region^ Notwithstanding a significant increase in IDA . assistance to Africa in 1972; it still accounted for less-than one-third, of IDVs total assistance, compared to close to two-thirds for Asia. In the fiscal year 1971/1972| IDA credits made up 61 per cent of total lending to Asia fro'rn the World Bank and IDA, as compared with some 53 per cent for

Africa.

\] Established under the Treaty of Rome in 1957*

E/CN- 14/-&MA/40 E/C».14/WPci/63

Page 18 -

Table 161 World Bank and IDA commitments (in percentages and dollars)

Africa Asia

Latin America and Europe

Others

Total percentage ' Total millions of

dollars

1964-1968 Average .

45.0s/

Caribbean 27*5

US

Source j World Bank Annual

a/ Oceania included.

Table 17j "World Bank loans percentages)

1969-

■ ■ * Bank AFRICA

Algeria . — ■

Botswana -

Burundi. -

Cameroon '17.20 Central African

Rep. ■ ..■ ■ . - Chad

Congo (People Rep,)

Dahomey -

Egypt

Ethiopia -

Gabon . —

Gambia —

Ghana -

Guinea . —

Ivory Coast 18050

Kenya 26.10 ■

Kenya Tanzania Egypt

87.8O

Lesotho . —

Liberia 7*40

Madagascar - .

Malawi ^—

•1970 IDA

—

2.50 0.40 1.7.50 4.30

_

1.50

-

26.00 6.60

~

2.10 14-30

—

_

6.10

—

—

—

9.60 5.30

—

13.2 100.0

1,127.0

1969-1970 Av e rage

19'8a/

29.9

_

8,6 100,0

1,985.0 . . 2

- ReP°ri; 197'1.

and IDA credits (in million

Total

_..

2.50 0-40 34.70 4.30

—

1.50

-

26,00 6.60

—

2.10 14-80

_.

18.50 32,20 87.8O

—

■ 7-40 9.60 ■ 5»3O

1970-1971

1971

18.9 33*8

28,4

2,0

16.9

100.0

,481.0

million

■,

US dollars

Bank IDA Total

_ _

32 3

_ _

1.50

_

2.20 .-

. - " 3.50

3O0

— ' —

9-50

■ __

7.10

9

27.50 - . 31,-30 12.60

1

— . —

__

5,00 7.25

—

35

_

1.50

—

2.20 3.50 3-50

—

9.5O

—

—

7.10 27.50

9

43*90

_

—

._

5-00 7.25

Bank

—

—

—

—

—

_

-

—

—

10.8

—

—

—

■ —

29.0

17.5

8.0

—

1.0

—

1972

19-6

• 34.9

32.2 1.0 12.2 100.0

i, 965-9

and

1971-1972 IDA

_

3.7

_

12.7

3.9

2.2

10.3 6.1 30.0

38.-7

—

—

—

—

22.0

—

—

8.4

15-36.6

■

Total

__

3.7\ . '■

—

12.7--

3.9 :.""

2.2

10.3

6,1 . . *

30.0

49.5 . ■ ■

—

—

—

— '

17.5 ■

51.0

8.0 . /

—

1-5-3 ■ ' " '

9-4 6,6 ■ ■

E/. 4/a E/CN.14/WP.i/63

Page 19

Table 1Vi World Bank loans and IDA credits (in million US dollars and

percentages) (continued) "' '

Bank

1969-1970 IDA Total

I97O-I97.I

Bank IDA Total

1971-1972 Bank IDA Total Iuaxi

Mauritania Mauritius Morocco Niger Nigeria Rwanda Senegal Sierra Leone Somalia Sudan Swaziland Tanzania ■ Togo 'Tunisia Uganda Upper Volta Zaire

Zambia

Africa total Percentage of

total Africa Asia

Latin America Europe

Cthei

Source:

--

—

_

68.30

_

•35-60

— _

—

—

10.00

—

—

—

10,80 281,70

16.8

2<3,6

41.8 9.6 6.2

World

7.70

_

_

7-30 0.60

—

9-30 2,10 . 3=00

—

—

7.,50

—

10-50■

11.60 ' 5.00

—

161.30

26.6 71.6 .1-8

—

1,6

7.70

—

—

75.60 0.60 35.60 9.30 2.10 3.00

—

_

7.50

—

20.50 . 11.60

—■

5.00 10.80' 443.00

19.4 37.4 31.2 7.0 5.0

— . ■

_

— '

45.00

: —

97.20

..■ . —

.T

3.7O

_■

. —

. 30.00

—

' 31.50

_

—

— '

40.00 347.20

18.3

22.6 35.4 21.0

2.7

Bank Annual Reports 1970,

The dobt problem

—

—

. 5,20

—

5.70

—

—

7.05 3.50 3.30

—

12.30

—

4.80 11.30 6.20 7.0C

—

121.50

20.8 70.1 5.8 3.3

—

1971,

. ■-

_

5..20 . 45 .00 5.7 a 97.20

—

7.05

7.20 3.30

—

_

42.30

—

36.30

'11.30

6.20 7.00 . 40.00

'468.70

18.9 33-8

28.4 17.9

2.0

1972.

. — ■

—

39.0

■ — ■

119-6

—

6.4

—

—

—

—

—

_

41.0

—

-

—

—

272.3

13.8 48.120.4

16.6 1.1

10.5 4-2 18.5

3.5

_

— :

3.0 11.2 4-3

■9.6 11.3

_

'17.3

_

15.0

—

5.0

35.5

—

308.8

30.9

63.5

1.1 3.6

0,9

10.5 4.2

3.5 57.5

119.6 3.0 17-6 4.3 9.6 11.3

—

17.3

—

56.O

—

5.0

35.5

—

581.1

19*6

34-9

32,2 12,2 1.1

47O There has been a growing awareness during the second half of the 1960a

"of the problem of the terms of assistance given to developing countries. In

July 196'5f DAC adopted a Recommendation on Financial Terms and "Conditions

establishing targets against which the performance of DAC members could be reviewed. In 1969 a supplement was adopted to the 1965 Recommendation.

Although the supplement is principally concerned with tho. establishing of an improved target for- terms,- one of its most forward-looking features was that for the first time official recognition was .given by DAC countries to the need for a minimum level of official development assistance

(0.7 per cent of GNp).' In October 1972 .1/, the OECD countries adopted a

j/ The annual meeting of DAC was held in Paris from 16 to 18 October 1?72

sees OECD Observer No. 61, December 1972.

E/CN.14/AMA/40 E/GNr14/WP.i/63

Page 20

new "Recommendation on Terms and Conditions of Aid" which supersedes those of 1965 and 1969. The new terms, which will apply to the Official Development Assistance' (ODA)'commitments made on and after 1"January 1973, provide for special terms for the least developed countries.

48, Although the general practical effect of the new norms adopted in October 1972 is likely to ba an improvement in terms, the conditions applied in 1971 did not yet fully meet the old terms target•established under the 1965 and 1969 recommendations. The 1971 terms of ODA were

more stringent than-those of 1970. Considering DAC countries as a whole, there was a decline in the grant share from' 63 to 60 per sent, a

shortening of the maturity period from 30.2 to 28.7 years and a reduction of the grace period from 7-3 to 6.5 years. The weighted average interest

rate was maintained at the same level (2.8 per cent). These aggregate

indicators conceal' widely differing performances by individual DAC

countries. Whereas some donors (Australia, Prance, Netherlands and Sweden) increased the grant share in their total ODA, others (Austria, Belgium, Canada, Germany (Federal Republic of) Norway, United Kingdom) kept it virtually unchanged and some countries (Denmark, Italy, Japan,

Switzerland and United States of America) considerably reduced this share. . 49. In 1971 only seven countries (Australia, Belgium,.Denmark,.France, Norway,

Netherlands and Sweden) complied v/ith the grant criterion of the 1969 Supplement

which provided th.vt at least 70 per cent of total ODA should be in grant form.

1 50. The financial conditions of aid provided by USSR have remained basically unchanged- The bulk of Soviet commitments take the form of development credits with maturities of 8 to 12 years at 2.5 per cent to 3 per cent interest. Trade credits at higher interest rates

(3. to 5 per cent) and shorter maturities are becoming increasingly

important. The conditions offered by the other Eastern European Socialist countries are, on average, harder than those of USSR. Thus Bulgaria and Romania-provide most. .of. their assistance in the form of trade credits.

On the other hand, the' financial conditions of aid given by the People's

Republic of China are far easier than, those offered by other Socialist

countries. Grants represent more than one-third of total aid, while the remaining is given in the form of inturest-free credits with grace periods of about 10 years and maturity of 10-15 years.

51. The-lending terms of the World Bank are closely linked to the borrowing

conditions.in world capital markets, the main source of the Bank's funds. In the fiscal year 1971/72 the Bank's borrowing costs, weighed by amount and maturity, averaged 7-38 per cent against 8.07 per cent in 1970/71 and 7*54

per, cent in 1969/70, The. Bank's lending rate established at 7*25 in September .1970 continued unchanged throughout the fiscal year 1971./72.' On 30 June 1972'the average annual return on- IFC.loans was 8.78 per cent

and that on equity investment 8.83 per cent. This resulted in an average

annual return on all IFC investments of 8.80 per cent, as compared to 8.87 per cent'in 1971 and 9.08 per cent in 1970. IDA finance is interest-

free and bears only 0.25 per cent p^r annum service charge*

.Table 18: The financial terms of Official development Assistance commitments from". PAC countries 1969-1971

Country

AustraliaAustriaBelgiumCanada"OenmarkPranceGermany(Federal:Republicof)ItalyJapanNorwayNetherlands.SwedenSv/itzerlandUnitedKingdomUnitedStatesofAmerica

TotalDAC GrantsaspercentageoftotalODAcommitments LOANSWEIGHEDAVERAG]

Maturity(years)Tnt.RT>Pflt. Graceperiod■hiI.YnflThJ

1969 1970. 1971

1969197019711969-19701971196919701971

100

69

92607674

5127429169

85

7648

70

65

9152.92659275⁵⁴⁵⁴3999

64

02a250

64 63

1005391

63

707754253399718878485960 14.628.2

48.$

25.017.010.219.536.028.647.233.0.24.137.128.-1 14.015.029.648.525-P.16-.727.6.13.121.423-029.035.4■36.028.637.4

30;2 10.830.043.025.O17.629-6"15.822.125.030.048.018.124.034-828.7 4.42.7.0.30.0'3.73.25.3.3-71.73.10.92.31.1'^3.0

2.9

6,4

4.52.30.2.0.03-82-94.93.72.42.91.52.01.7^2.62.8 3.62.20.40.04.02.04.43.52.03*00.84.11.1.2.92.8 4.27.?9.87.01.9^7.61.86.17.98.110.08.05.68.7

6.7

4.04.69-29.87.01-5

6.7

9-07.810.08.06.2

8.7

7.3 2.59-5

8.9

7-02.56.63.16.75.07.010.05.95.97.6

6.5 Source: OSC7) "Development Assistance 1Q71 Review -Tables- IV-1 and IV-2

DevelopmentAssistance1972Review-TableII-4.

E/CN.14/AMA/40 E/CN-U/WF. 1/63

Page 22

52v The general tightening of the terms of financial assistance to developing countries ia reflected in the average terms of assistance to African countries, The estimated grant element of loans and grants, which had "been fluctuating around 67.-68 per cent during the last half of the 196C\s, fell to 6l per cent in' 1970. This was the result of a drop in the amount of grants received by the region from an average of about US$800 million during the period 1965-1969 to less than

US$700 million in 1970,

l Average terms of loan commitments and grant element of loans and to Africa 196^-1970

(Amounts in USS million)

Loan Commitments

/Grant;

(amoun1

Year Amount Maturity

(years)

^Grace

(years)-

Interest

(50

^elementGrant

1965

1966

1967

1968

1969

1970

1,331.70 1,077-24 1,142,37 1,220=72 1,207.28 1,821-60

23.417.8 20.2 22.5 23.0

23.5

3.8

3,9

5.7

5-4

3?729

3,847

3,135 4,005 4,141

3,845

44 39 47 43 43

45

861.72 731*94,- 755.92 830.05 846.25 6,99-02

Grant element of loans .and.

grants

a/

: 65 67 69 67

68>

61

Amount of loans used for terms calcu lations

0/

1,204-49

962.25 1,040,81 1,101,78 1,053.53

1,700.45

Source* World Bank Report 1972 (Table 9). - - , .

a/ The grant element is the face value of loan commitments less the discounted

percent value of the future flow of repayments, of principal and interest, rising at the customary rate of 10 per cent and expressed as a percentage of face value.

f

b/ Data taken froi^ OECD (DAC) and IDE sources. Included are grant-like flows (loans repayable in local currencies), bilateral grants and United Nations

agency grants. Figures for grants are on a disbursed basisv while figures for loans are on a commitment "basis. The grant element of a grant is

100 per cent. . .

of This column shows \be amount of loans for which repayment terms are known.

E/CN.14/AMA/40 /CIn14/tfP.i/63

Page 23

53- Donors? terms policies -should be considered and assessed1 in the

context of the growing debt' difficulties of the developing countries.' Data collected on indebtedness by the World Bank show that for 37 African

countries and the East African Community outstanding public and publicly guaranteed debts totalled '$10,693-5 million as of 31 December 1970-

Compared with the 1965 figure'('this represents an annual rate of increase of 11.7 per cant. Debt service payment by the same countries rose to

$787.8. million in 1970, an annual increase of about 11.0 per cent since 1965' The increase in debt service between 1970 and 1971, amounting

to some 31 per cent, is disquieting.

Table 20: Outstanding external public debt and debt service payments of 37 African countries and the East African Community (in million US

dollars): ~~ ~~~

Debt outstanding ■ "Service 31 December ■' payments

3,309.0 172.O

6,143.8 467.2

7T2O2.2 477.4

8,181.0 46O.9

9,-018.6 596.2

1969 ■ 9,688.0 681.9

19?° 10,693.5 787.8 ,

... 1,033.6*/

Source; World Bank Annual Report 1972, tables 4, 7 and 8.

a/ Projection.

54.. The magnitude of public debt service of African countries has a significant impact on the net transfer of resources. In spite of the increase in total gross disbursements (including official grants), the net -transfer of resources, after allowing, for repayment of amortization and interest, hardly shows an upward trend but fluctuates between

US$950 and US$1,250. .

Table 21 z External resources flows and service payments on external public and publicly guaranteed debt to developing African countriar, /in m-m inn

US dollars) "

US dollars)

Disbursements Debt service Met transfer a/

1 — 46T2 : TTT27T9

1,424-5 . 477.4 951.1

1967 1,566.6 46O.9 ' 1 10s.7

1968 1,658.4 596.2 1 062.2

1969 1,635.5 . 681.9 9S3.6

1970 2.029.4 ,_ 787.8 , 1,241,6

Source: World Bank Annual Report 1972, Table 8.

a/ Disbursements minus amortization and interest on loans.