Technical Paper No 6

The last decade has exemplified a retrenchment of bank lending in developing countries. International banks strive to boost capital ratios, thereby raising equity, reducing their less profitable assets and rebalancing portfolios towards less risky claims. In that context of underfinanced adjustment and growth programmes in the LDCs, international financial institutions (IFIs) have attempted to mobilize additional financing from commercial banks through co-financing and guarantee operations. The World Bank has been at the forefront of such a role since 1983. The B-loan programme, however, has fallen short of reviving private lending in the LDCs. In 1989, the World Bank introduced an enhanced co-financing operation programme (ECO) geared toward creditworthy borrowers. Risk-sharing arrangements with private banks involve the guarantee of late maturities as well as direct participation in bank loans and partial guarantee of bond issues. Despite more flexible guidelines for the World ...

Four scenarios for the global trading system in the 1990s are outlined and their implications for developing countries considered: (i) further development of a GATT-based trading regime; (ii) development of a world of trading blocs -- where the critical issue is not whether they will emerge (they will) but whether they become "building blocks" for a more integrated global system or "stumbling blocks" that cause the system to fragment; (iii) development of a system of managed trade, where political forces would dominate outcomes and which could evolve out of the friction between Japan and the United States or Europe; and (iv) movement beyond GATT and dealing with international problems "at the borders" toward a system of deeper global harmonisation in such areas as competition policy, standards, regulatory practices and technology policies. The answer to the question of which of these scenarios will predominate is of growing importance for developing countries, both because of ...

Buoyant oil revenues in the 1970s provided Nigeria with the basis for large but unsustainable increases in incomes and public expenditure. Agriculture was neglected and the economy became heavily dependent on crude oil and more vulnerable to external shocks. These led to fundamental changes in the structure of the Nigerian economy. When the oil revenues collapsed following the glut in international oil market in the early 1980s, the country faced an acute economic crisis. Unable to shift gears in the face of changing economic fortunes the country resorted to external borrowing. Instead of adjusting, the government adopted a policy of deficit financing. The deficits were financed by borrowing from international capital markets (ICM), a drawn-down of external reserves, and by accumulation of arrears on external trade payments. The debt stock grew rapidly from $3.4 billion in 1980 to $17.3 billion in 1985 and $32.9 billion in 1990. In 1986, the government adopted a structural ...