C:s 9 ° -SWP449 The Policy Experience of Twelve Less Developed Countries, 1973-1978 Bela Balassa WORLD BANK STAFF WORKING PAPERS Number 449 PUB HG 3881.5 .W57 W67 no .449 c.2 WORLD BANK STAFF WORKING PAPERS Number 449 The Policy Experience of Twelve Less Developed Countries, 1973-1978 Bela Balassa The World Bank Washington, D.C., U.S.A. Copyright ©) 1981 The Intemational Bank for Reconstruction and Development/THE WORLD BANK 1818 H Street, N.W. Washington, D.C. 20433, U.S.A. All rights reserved Manufactured in the United States of America First printing April 1981 Second printing February 1985 This is a working document published informally by the World Bank. To present the results of research with the least possible delay, the typescript has not been prepared in accordance with the procedures appropriate to formal printed texts, and the World Bank accepts no responsibility for errors. The publication is supplied at a token charge to defray part of the cost of manufacture and distribution. The World Bank does not accept responsibility for the views expressed herein, which are those of the authors and should not be attributed to the World Bank or to its affiliated organizations. The findings, interpretations, and conclusions are the results of research supported by the Bank; they do not necessarily represent official policy of the Bank. The designations employed, the presentation of material, and any maps used in this document are solely for the convenience of the reader and do not imply the expression of any opinion whatsoever on the part of the World Bank or its affiliates concerning the legal status of any country, territory, city, area, or of its authorities, or conceming the delimitation of its boundaries, or national affiliation. The full range of World Bank publications, both free and for sale, is described in the Catalog of Publications; the continuing research program is outlined in Abstracts of Current Studies. Both booklets are updated annually; the most recent edition of each is available without charge from the Publications Sales Unit, Department T, The World Bank, 1818 H Street, N.W., Washington, D.C. 20433, U.S.A., or from the European Office of the Bank, 66 avenue d'lena, 75116 Paris, France. The author is Professor of Political Economy at the Johns Hopkins University and consultant to the World Bank. He is greatly indebted to Gholam H. Azarbayejani for developing the computer program used in the calculations, to Joelle Chassard Manibog and Robert E. Therriault for the collection of information, and to Robert E. Therriault for undertaking the calculations. ISBN 0-8213-9310-3 ABSTRACT This paper uses the methodology earlier applied in the author's "The Newly-Industrializing Developing Countries After the Oil Crisis" (World Bank Staff Working Paper No. 437, October 1980) to examine the policy experience of twelve less developed countries in the period following the quadrupling of oil prices in 1973-74 and the world recession of 1974-75. The group includes countries suffering adverse external shocks, countries where these shocks were aggravated by internal shocks resulting from domestic policies, as well as countries experiencing favorable external shocks. The paper provides estimates of the balance-of-payments effects of external shocks in the form of the deterioration of the terms of trade and the slowdown of world export demand in the individual countries. It further analyzes the policies applied and estimates the balance-of-payments effects of policy choices in the form of additional net external financing, export promotion, import substitution, and (temporarily) lowering the rate of economic growth. The results show export promotion to be positively, and import sub- stitution negatively, correlated with the rate of economic growth in the period 1973-79. The results reflect the favorable experience of countries following outward-oriented policies (Ivory Coast, Thailand, and Tunisia) and the high cost of import substitution, in particular in countries experiencing internal shocks in the form of increased government intervention in economic life, higher protection, and reduced use of the market mechanism (Jamaica, Peru, and Tanzania). It further appears that,apart from Kenya and Thailand, countries experiencing adverse external shocks relied on financing from abroad rather than on domestic adjustment to cope with these shocks. Foreign borrowing was increased also in countries that experienced favorable external shocks, whether continuing or temporary, and the proceeds were used in large part to finance high-cost, capital-intensive public investment, with adverse effects in economic growth (in particular, in Morocco, Indonesia, and Nigeria). THE POLICY EXPERIENCE OF TWELVE LESS DEVELOPED COUNTRIES, 1973-1979 Bela Balassa I. Analyzing External Shocks and Policy Experience of Less Developed Countries Introduction The non-OPEC developing countries suffered various external shocks after 1973. In the 1973-78 period, these shocks included the quadrupling of oil prices, which took full effect in 1974, and the world recession of 1974-75, which was followed by a relatively slow recovery. There were also pressures for increased protection in the developed countries. The quadrupling of oil prices adversely affected the balance of payments of mDst non-OPEC developing countries. These effects were aggravated by the deterioration of the non-oil terms of trade in the case of some of the countries, and alleviated by improvements in the non-oil terms of trade in the case of others. For several non-OPEC countries, in particular those exporting cocoa and coffee, a net improvement in the terms of trade ensued, representing a favorable external shock. The slowdown in foreign demand for their exports, whether due to lower rates of economic growth or increased protection abroad, had adverse effects on the balance-of-payments of OPEC and non-OPEC developing countries alike. These export volume effects varied from country to country, depending on the composition of exports, since foreign demand for individual products and product groups changed at different rates. Developing countries, whose terms of trade effects and export volume effects combined gave rise to a deterioration in the balance-of-payments, adopted various policy measures to alleviate these adverse consequences. Depending on the country concerned, the policy responses included increased -2 - reliance on external financing, measures of export promotion and import substitution, as well as macroeconomic policy measures affecting imports indirectly through a decrease in the rate of economic activity. Developing countries, where the net effects of external shocks on the balance of payments were favorable, may in turn have curtailed reliance on external financing (accumulated reserves), reduced efforts aimed at export promotion and import substitution, or increased the rate of economic activity. In this paper, estimates have been made on the balance-of-payments effects of external shocks, and of policy responses to these shocks, in twelve less developed countries that are in the range between the newly- industrializing countries and the least developed countries. The paper will also examine the effects of "internal shocks," which find their origin in government policies. In the following, the analytical framework underlying the estimates will be described and the principal characteristics of the countries in question indicated. The Methodological Annex contains the formulas used in the estimation. External Shocks The external shocks analyzed in the paper include changes in the terms of trade and the slowdown of foreign demand for the exports of the less developed countries. The balance-of-payments effects of these shocks have been estimated by postulating a situation that would have existed in the absence of external shocks. Terms of trade effects have been derived as the difference between the current price values of exports and imports and their constant price values, calculated in the prices of the 1971-73 ("1972") base period. They have further been decomposed into a pure terms of trade effect, estimated on the assumption that the balance of trade, expressed in terms of "1972" prices, was - 3 - in equilibrium, and an unbalanced trade effect, indicating the impact of the rise of import prices on the deficit (surplus) in country's the balance of trade, expressed in "1972" prices. This procedure reflects the assumption that price increases since "1972" have been due to external shocks, in particular the direct and indirect effects of the quadrupling of oil prices. The balance-of-payments effects of the slowdown of foreign demand on the exports of the less developed countries have been calculated as the difference between the trend value of exports and hypothetical exports. The trend value of exports has been derived on the assumption that the growth rate of foreign demand for traditional export commoditiesl/ and for major product categories remained the same as in the 1963-73 period and that the country concerned maintained its *1972" share in these exports while hypothetical exports have been estimated on the assumption that the country maintained its "1972" share in actual world exports during the period under consideration. In the case of manufactured goods, the effects of changes in foreign GNP growth rates and in "apparent" foreign income elasticities of import demand, calculated as the ratio of the rate of growth of imports to that of GNP, have further been distinguished. The Policies Applied The paper considers policy responses to external shocks which involve additional net external financing, export promotion, import substitution, and lowering the rate of economic growth. The balance-of-payments effects of these policies have again been estimated by postulating a situation that would have occurred in the absence of external shocks. 1/ Defined as products that accounted for at least 1.5 percent of the country's total exports in "1972". - 4 - Additional net external financing has been derived as the difference between the actual trade balance and the trade balance that would have obtained if trends in imports and exports observed in the 1963-73 period continued and import and export prices remained at their "1972" level. Non- factor services and private transfers do not enter into the calculation as they are assumed to be unaffected by external shocks. The effects of export promotion have been calculated as changes in exports associated with increases in the country's "1972" export market shares. In turn, import substitution has been defined as savings in imports resulting from a fall in the income elasticity of import demand in the country concerned. Finally, the effects on imports of changes in GNP growth rates as compared to the 1963-73 period have been calculated on the assumption of unchanged income elasticities of import demand in the importing country. As noted above, domestic policy measures may also have been taken independently of external shocks and may themselves constitute an "internal shock." The methodology applied does not permit separating the balance-of- payments effects of policy changes taken in response to external shocks from the effects of autonomous policy changes. Correspondingly, the distinction between the two necessarily becomes a matter of interpretation. Country Classification Table A provides comparative data on the twelve less developed countries under study. These countries divide into four groups, depending on the character of the external shocks they have experienced and the internal shocks they may have suffered. The first group includes three North African countries, all of which showed an improvement in their "pure" terms of trade, calculated on the assumption of balanced trade in "1972" prices, as a result of the rise in the prices of their petroleum (Egypt, Tunisia) or phosphate (Morocco, Tunisia) exports. Nevertheless, these countries experienced substantial losses in their terms of trade, as defined in this paper, on account of the unfavorable effects of higher import prices on their trade deficit, expressed in "1972" prices. At the same time, increased workers remittances and the rise in service earnings, in particular tourism, offset much -- or all -- of the adverse balance-of-payments effects of external shocks in the three countries. There were no such offsetting factors in the second group of countries, comprising Kenya, the Philippines and Thailand. And, in contrast to the first group, import prices rose more rapidly than export prices in these countries, thereby aggravating the adverse effects of higher import prices on their trade deficit, expressed in "1972" prices. The third group of countries, including Jamaica, Peru, and Tanzania, experienced internal shocks that aggravated the effects of adverse external shocks. In Jamaica, policy changes under the Manley government, in Peru the military takeover, in Tanzania the Uhuru movement and related policies may be considered as internal shocks that adversely affected domestic production and exports. The fourth group of countries, comprising Indonesia, the Ivory Coast, and Nigeria, experienced favorable external shocks as improvements in the terms of trade far exceeded the adverse export volume effects. In the two OPEC member countries, Indonesia and Nigeria, increases in petroleum prices, in the Ivory Coast the rise in cocoa and coffee prices explain the result. II. The Balance-of-Payments Effects of External Shocks In this section, empirical evidence will be provided on the balance-of- payments effects of external shocks, in the form of terms of trade effects and export volume effects, for the twelve less developed countries under study. - 6 - A comparative analysis of the relative importance of these sources of external shocks will also be presented. Table 1A reports the estimated terms of trade and export volume effects for the years 1974 to 1978, taken individually, as well as averages for these years, while Appendix Table 1 shows the average results for the 1974 to 1978 period in a disaggregated framework. Table 1B relates terms of trade effects to the average of exports and imports (average trade) and to the gross national product, and export volume effects to exports and to the gross national product, all expressed in "1972" prices. Export volume effects are shown in a four commodity group breakdown in Appendix Table 2. Terms of Trade Effects The first group of North African countries showed an improvement in their pure" terms of trade throughout the period under consideration. This was more than offset, however, by the adverse effects of higher import prices on their trade deficit, expressed in "1972" prices, that was rising over time. As a result, terms of trade effects increased from 1 percent of GNP in 1974'to 26 percent in 1978 in Egypt, from -4 percent to 8 percent in Morocco, and from -4 percent to 10 percent in Tunisia. (Favorable terms of trade effects are shown with a negative sign.) The deterioration of the terms of trade also increasingly burdened the balance of payments of the Philippines and Thailand, where both the pure terms; of trade effect and the impact of higher import prices on the trade deficit, measured in "1972" prices, were unfavorable. The resulting terms of trade loss, expressed as a percentage of GNP, increased from 2 percent in 1974 to 8- percent in 1978 in the Philippines and from 2 percent to 6 percent in Thailand. In 1978, the pure terms of trade effect accounted for three-fifths of the total terms of trade loss in the Philippines and for one-third of the - 7 - total in Thailand, reflecting a larger trade deficit in terms of "1972" prices in the latter case. Changes in the terms of trade showed considerable similarities in Kenya and in Tanzania. Largely as a result of variations in coffee prices, both countries experienced a deterioration in their pure terms of trade in 1974 and 1975, followed by improvements in 1976 and 1977, and a further deterioration in 1978. With the effects of rising import prices on the trade deficit decreasing in 1976, and rising again afterwards, the ratio of the terms of trade loss to GNP fell from an average of 8 percent in 1974-75 to approximately 1 percent in 1976-77 in both countries, giving place to .a loss of 16 percent in Kenya and 14 percent in Tanzania in 1978 as coffee prices declined. Terms of trade effects also showed considerable fluctuations in Jamaica, with the pure terms of trade effect deteriorating between 1974 and 1976, and improving afterwards, largely as a result of variations in the prices of bauxite and alumina. Correspondingly, after rising from 4 percent of GNP in 1974 to an average of 11 percent in 1975-76, Jamaica's terms of trade loss declined again to 4 percent of GNP in 1977-78, on the average. In conjunction with the decline in copper prices, the pure terms of trade effect turned increasingly unfavorable in Peru. After 1975, however, this was more than offset by reason of the improvement in the trade balance, expressed in "1972" prices. As a result, of these influences, after a slight gain in 1974, the terms of trade loss reached a high of 7 percent of GNP in 1975 and declined afterwards to 2 percent in 1978. Among countries experiencing favorable external shocks, the terms of trade gain varied between -11 percent and -18 percent of GNP during the period under consideration in Indonesia, amounting to -17 percent in 1978. In turn, - 8 - this gain declined from -22 percent in 1974 to -5 percent of GNP in 1978 in Nigeria, largely because of the effects of higher import prices on its rising trade deficit, expressed in "1972" prices. Finally, fluctuations in cocoa and coffee prices explain changes over time in the Ivory Coast, with the terms of trade gain amounting to -5 percent of GNP in 1974 and reaching double this level in 1978. Export Volume Effects Except for a small gain in 1974 in Egypt, export volume effects were unfavorable in all twelve less developed countries throughout the period under consideration. The resulting export shortfall exhibited a steady upward trend in the three North African countries and in the two countries of the Western Hemisphere, from less than one percent of GNP in 1974 to 2 percent in 1978 in Morocco, 3 percent in Peru, 4 percent in Egypt and in Tunisia, and 14 percent in Jamaica. In the latter case, unfavorable trends in world demand for bauxite and, in particular, alumina contributed to the observed result. While the world exports of alumina rose at an average annual rate of 18 percent in the 1963-73 period, the increase was 6 percent a year afterwards. Apart from Thailand, similar developments were observed in the other countries studied, although the rebound from the world recession led to a temporary improvement in 1976. The ratio of the export shortfall to GNP reached 2 percent in Tanzania in 1978, 3 percent in Indonesia, Kenya, Nigeria, and the Philippines, and 4 percent in the Ivory Coast; it was approximately I percent in the countries concerned in 1974. Thailand provides a special case, inasmuch as the peak export shortfall, amounting to 1 percent of GNP in 1975, was not again reached afterwards. The relatively small export shortfall, and its decline after 1975, is explained by - 9 - the rapid growth of world demand for maize, averaging 6 percent a year during the period under consideration. Terms of Trade Effects vs. Export Volume Effects The results indicate the relative importance of terms of trade effects in the oil-importing countries under study. In 1974, the ratio of the terms of trade effects to export volume effects was especially high in Kenya (18), Tanzania (16), Thailand (13), and Jamaica (8). With the slowdown in the rise of petroleum prices and the increase in export shortfalls, the ratio declined in subsequent years, although it increased again in 1978 in Kenya and in Tanzania as coffee prices fell and it fluctuated to a considerable extent in Thailand in response to variations in export shortfalls. The relevant results for 1978 were 9 for Thailand, 6 for Kenya and Tanzania and practically nil in Jamaica. In the latter case, the very large rise in the export shortfall was responsible for the outcome. In 1974, the ratio of terms of trade effects to export volume effects was 2 in the Philippines that benefited from high copper and vegetable oil prices. In the same year, high copper prices led to a terms of trade gain in Peru while such a result was due to high phosphate prices in Morocco and in Tunisia. Finally, high petroleum prices reduced the terms of trade loss to practically nil in Egypt that also enjoyed a small positive export volume effect in 1974. With the fall of copper prices, the ratio of terms of trade effects to export volume effects rose to 4 in 1975 in Peru, but subsequently declined to 1-by 1978. A similar pattern was observed in the Philippines, where the ratio reached a peak of 7 in 1976 and decreased to 3 in 1978. In turn, due largely to the impact of increased import prices on their rising trade deficit in terms of "1972" prices, the ratio of terms of trade effects to import volume - 10 - effects rose to 4 in 1978 in Morocco, 7 in Egypt, and 3 in Tunisia, notwithstanding the fact that the latter two countries enjoyed an increased export surplus in petroleum. In indicating the relative importance of terms of trade effects in the oil-importing countries, the findings conflict with the conventional view that gives emphasis to the unfavorable effects of the world recession and the subsequent slow recovery in the developed countries on the balance of payments of the developing countries. Nor do the results support the view that increased protectionism in the developed countries would have adversely affected the exports of manufactured goods from the developing countries. Thus, the data show an increase in the "apparent" income elasticity of import demand in the developed countries for manufactured goods originating in the developing countries between the pre-1973 and the post-1973 periods. This increase in the income elasticity of import demand offset about one-fifth of the export shortfall due to the slowdown of economic growth in the developed countries. In intra-LDCs trade, the favorable effects of high GNP growth rates and income elasticity of demand reinforced each other, with beneficial effects for countries, such as Egypt and the Ivory Coast, for whose manufactured exports the markets of other developing countries represent important outlets. In the case of Egypt, however, these favorable effects were far outweighed by the joint impact of lower GNP growth rates and the decline in the income elasticity of demand for manufactured goods originating in the developing countries on the part of centrally planned economies that provided markets for two-thirds of Egypt's manufactured exports in the early seventies. - 11 - III. The Policies Applied and their Balance of Payments Effects Section II of the paper examined the impact of external shocks, in the form of terms of trade and export volume effects, on the balance of payments of twelve less developed countries, classified in four groups. Section III will analyze the policies employed by the individual countries and indicate their balance-of-payments effects. Unless otherwise noted, the estimates pertain to the year 1978. Table 1A shows the balance-of-payments effects of the policies applied while Table 1B relates the results to the volume of exports, imports, average trade and the gross national product, as the case may be, all expressed in "1972" prices. More detailed estimates are shown in Appendix Tables 1 and 2. In turn, Table 2 provides information on the financing of the resource gap, Table 3 on nominal and real interest rates, the government budget, and the money supply, Table 4 on nominal and real exchange rates vis-a-vis the U.S. dollar, Table 5 on debt service and the external debt ratios, and Table 6 on expenditure shares, incremental capital-output ratios, and rates of economic growth. Egypt, Morocco, Tunisia In 1974, the combined balance-of-payments effects of external shocks equalled 1 percent of the gross national product in Egypt, -3 percent in Morocco, and -4 percent in Tunisia. The effects of these shocks turned unfavorable in 1975 in Morocco and Tunisia, and increased further in subsequent years in all three countries. By 1978, their ratio to GNP was 29 percent in Egypt, 10 percent in Morocco, and 14 percent in Tunisia. Increased toll revenue from the Suez Canal, tourist receipts, and workers remittances outweighed the adverse balance-of-payments effects of external shocks in Egypt. But, additional net external financing was more - 12 - than double the balance-of-payments effects of external shocks as the adverse impact of negative import substitution and losses in export market shares was offset only in small part by import savings associated with changes in GNP growth rates. The latter result represented a combination of the acceleration of economic growth and the negative income elasticity of import demand observed in the 1963-73 period. The negative income elasticity of import demand in 1963-73 had its origin in Egypt's foreign exchange shortage during the period that led to an absolute decline in the volume of imports. In turn, negative import substitution after 1973 reflected the increased availability of foreign exchange, the rapidly growing need for imported food, and the high import content of rising investment. Import liberalization had less of an influence as competing imports continued to be practically excluded in Egypt. On the export side, large losses in market shares in Egypt's traditional export products and in its manufactured exports were-not compensated by the small gains obtained in fuels and in nontraditional primary exports (mainly potatoes and onions), so that Egypt suffered a one-third loss in its average export market shares. Among traditional primary exports, Egypt's market share declined by seven-tenths in the case of rice, by one-half in the case of cotton, and by one-fourth in the case of citrus fruit. In the same period, Egypt's market share in manufactured exports fell by one-fourth. A one-tenth loss in export shares occurred in the centrally planned economies, which traditionally took two-thirds of Egypt's manufactured exports, losses by one-half were experienced in developing country markets, reflecting largely political changes in the Middle East, and a decline by one- fifth was observed in developed country markets, reflecting the increased overvaluation of the currency. At the same time, with the unification of the - 13 - exchange rate system, the figures cited in Table 4 understate the appreciation of the real exchange rate after 1973. But, Egypt improved its savings performance with the share of domestic savings in GNP reaching 20 percent towards the end of the period as compared to 10 percent in 1963-73. Also, the share of gross domestic investment in aggregate expenditure rose from 14 percent in 1963-73 to 20 percent in 1974- 76, and to 24 percent in 1977-79. As incremental capital-output ratios first declined and subsequently increased again, the rate of growth of GNP doubled in the 1973-76 period and rose slightly afterwards. Apart from domestic savings, the high rate of investment was financed by continued foreign borrowing. As a result, the ratio of Egypt's gross external debt to GNP increased from 48 percent in 1973 to 70 percent in 1978. Given Egypt's poor export performance, the rise in its gross debt service ratio (the ratio of interest payments and amortization to export value) was even greater, from 24 percent in 1973 to 83 percent in 1978. In Morocco, earnings from tourism and, in particular, workers remittances increased to a considerable extent, offsetting much of the adverse balance-of-payments effects of external shocks. However, additional net external financing was one-half larger than the balance-of-payments effects of external shocks. This result reflected the combined effects of losses in export market shares, negative import substitution, and rising imports associated with the acceleration of economic growth. Morocco experienced losses in market shares in every major export commodity other than phosphates and fuels, as well as in nontraditional primary products and in manufactured goods. These losses rose over time as the Moroccan currency became increasingly overvalued, reaching one-fifth of total exports in 1978. The effects of the appreciation of the real exchange - 14 - rate, increased food imports made necessary by the poor performance of agriculture, and the high import content of investment further gave rise to negative import substitution in Morocco. The share of gross fixed investment in aggregate expenditure increased from 13 percent in 1963-73 to 20 percent in 1974-76 and to 23 percent in 1976- 78. However, following a decline in 1974-76, the incremental capital-output ratio rose more than threefold as large investment projects of questionable efficiency were undertaken. The resulting fall in the rate of economic growth was aggravated by the deflationary policies adopted in 1978, in response to the international liquidity problems created by Morocco's increased indebtedness. Thus, after rising from 4.5 percent a year in 1963-73 to 9.3 percent in 1973-76, the average annual rate of growth of GNP fell to 3.5 percent in 1976-t9. The increase in the rate of investment was largely financed by the inflow of foreign capital as the domestic savings ratio remained at about 15 percent. Rising interest payments and amortization of the debt, in turn, raised Morocco's debt service ratio, necessitating further foreign borrowing. By 1978, the gross debt service ratio reached 32 percent and the ratio of gross external debt to GNP 39 percent; the corresponding ratios were 13 percent and 18 percent, respectively, in 1973. Morocco's increased indebtedness reflected the effects of expansionary policies followed in the wake of increases in phosphate prices that, however, remained temporary. These policies adversely affected the longer-term perspectives of the economy, both through the inappropriate choice of some large investments and the increased foreign indebtedness that necessitated a retrenchment which may last for several years. The situation was aggravated by the war in the Sahara. - 15 - While Tunisia had the same experience with phosphate prices as Morocco, given its higher trade share, the deterioration of the terms of trade represented a somewhat higher proportion of its GNP. Tunisia also suffered a larger export shortfall than Morocco, due chiefly to EEC restrictions on the importation of olive oil, its principal export. Finally, increases in tourist receipts and workers' remittances offset a smaller part of the adverse balance-of-payments effects of external shocks than in Morocco. Nevertheless, Tunisia avoided excessive foreign indebtedness, and hence it did not have to interrupt its growth process. The ratio of gross external debt to GNP increased only from 32 percent in 1973 to 44 percent in 1978 while the debt service ratio declined from 30 percent in 1973 to 24 percent in 1978 (the results are somewhat less favorable if the ratios are calculated in net terms by adjusting for reserve changes in the first case and for interest receipts in the second). These results are explained in part by Tunisia's successful savings effort, with domestic savings reaching one-fifth of GDP as against 15 percent in Morocco. Differences in savings ratios, in turn, may be explained by differences in real interest rates and in the government budget deficit. Apart from a slightly negative figure in 1977, Tunisia maintained positive real interest rates after 1974 whereas real interest rates were consistently negative in Morocco. Furthermore, the deficit in the government budget remained below 5 percent of the gross national product in Tunisia while it surpassed 15 percent in both 1976 and 1977 in Morocco, representing a substantial increase as compared to the 4 percent figure in 1974. In 1978, the budget deficit equalled 3 percent of GNP in Tunisia and 11 percent in Morocco. - 16 - Also, high-cost, capital-intensive investments were much less prevalent in Tunisia than in Morocco, so that its incremental capital-output ratio rose to a lesser extent. With investment shares rising from 22 percent in 1963-73 to 26 percent in 1973-79, Tunisia's GNP rate growth was 7.4 percent in the latter period as compared to 6.1 percent in the former. In contrast to both Egypt and Morocco, Tunisia was also successful in increasing its export market shares as it provided greater incentives to exports and maintained the real exchange rate approximately constant. Increases in manufactured exports (in particular, textiles) were quite spectacular, with Tunisia doubling its market share, while there was little change, on balance, in regard to primary exports. But, like the other two North African countries, Tunisia experienced negative import substitution, due largely to higher food imports and the import requirements of increased investment; its imports increased further as a result of the acceleration of the rate of economic growth. Kenya, Philippines, Thailand In 1974, the balance-of-payments effects of external shocks equalled 10 percent of the gross national product in Kenya, 2 percent in Thailand, and 3 percent in the Philippines. In Kenya, the ratio fell to 1 percent in 1976 as coffee prices increased, but it rose again to 18 percent in 1978 as coffee prices declined. In turn, the balance-of-payments effects of external shocks increased more or less continuously in the Philippines and in Thailand, reaching 11 percent and 6 percent, respectively, in 1978. In Kenya, additional net external financing was consistently smaller than the balance-of-payments effects of external shocks, reflecting the reliance placed on domestic measures of adjustment. In contrast with the three North African countries, which exhibited negative import substitution and increased - 17 - imports in response to higher growth rates, Kenya saved foreign exchange through import substitution, as well as through a modest reduction in the rate of economic growth in the years immediately, following the oil crisis. Part of the reduction in import shares was due to the disintegration of the East African Community. For the same reason, Kenya experienced a decline in its market shares in nontraditional primary and manufactured exports. Excluding trade with Tanzania and Uganda, there was a gain in export market shares in these commodities. Kenya also increased its market shares in most traditional exports that are sold largely outside East Africa. Tncreases in export market shares reflect the effects of the introduction of a 10 percent export subsidy to nontraditional exports and the alignment of agricultural prices to world market price relationships following the oil crisis and the world recession. While import protection increased also with the extension of the scope of Letters of No Objection privileges which gave firms effective veto power over the imports of competing products. Kenya continued to maintain a relatively outward-oriented stance among developing countries. Changes in the system of incentives, introduced in 1979, represented further steps towards outward orientation. These changes included the replacement of quantitative restrictions by tariffs, the elimination of Letters of No Objection privileges, and increases in export subsidies to nontraditional exports from 10 percent to 20 percent. The effects of these measures were mitigated, however, by increases in tariffs. Apart from the expansionary policies followed in the years of high coffee prices, the monetary and fiscal measures applied in Kenya were generally in line with the needs of the national economy and excessive forelgn borrowing was avoided. As a result, the ratio of gross external debt to GNP increased - 17. - Table IA Balance of Payments Effects of External Shocks and of Policy Respoones to Thlese Shacks (US$ mdillon) Average ~~~~~~~Averag Average 1974 1975 1976 1977 1978 1974-78 1974 1975 1976 1971 1978 1976-78 1974 1975 1976 1977 1978 1974-7q E G Y P T N 0 5 0 C C 0 T U N L S I A 1. E.terol Shocks (1) Terso of Trade Effects 50 932 809 1211 2421 1085 -234 113 497 795 648 364 -126 156 201 258 405 179 (2) Export Vol... Effects -5 137 186 169 323 166 15 100 406 131 160 102 25 97 88 128 146 95 (3) Together 63 1069 996 1400 2745 1251 -219 213 604 926 808 466 -103 253 290 376 5Si 274 iS. PolIy esoxe (4) Additixo..l Net External Fixaxclg 1003 2791 2688 3564 5558 3121 8 812 1136 1673 1269 980 29 379 549 700 995 511 (5) Lsrexei Export Marhet Share -263 -164 -197 -309 -249 -236 -14 -99 -112 -145 -128 -150 59 44 11 30 68 42 (6) I.Port Subot1rtitoe -640 -1536 -1547 -1942 -2665 -1666 -191 -412 -242 -402 -156 -261 -171 -122 -219 -309 -331 -230 (7) Effect of Lower GDP Growth fate -56 -22 52 87 101 32 -22 -89 -179 -199 -177 -133 -19 649 -52 -46 -80 -49 (8) Togethor 65 1069 996 1600 2745 1251 -219 213 604 926 806 466 -103 253 290 376 551 274 K E 8 1 A T HI A I L. A 8 3 PHI LIP PI NE I I. Ectersal Shock (1) -Terms o~fTrade Effects 238 158 12 19 538 193 181 564 694 813 814 581 264 1015 1143 1061 1234 042 (2) Export Vol..e Effects 13 45 29 72 86 49 14 115 25 63 97 63 169 242 171 291 468 264 (3) Together 251 203 41 91 624 242 195 679 519 875 951 644 613 1252 1314 1352 1702 1207 IT. Poli y Res po ae Add itions let Ester-s PFnanciog 179 86 -123 -25 422 158 68 323 -290 121 129 70 680 1656 1445 1272 1942 1359 (5) Increase in Export Msrket Share -6 -2 -22 -42 -76 -33 16 36 362 470 482 273 -99 -6 117 216 179 81 (6) Inpoet Sxhstitutloo 37 101 159 138 268 145 74 260 415 235 395 275 -130 -152 4193 -70 -339 -177 (7) Effect of tossr TSP Grwoth Rate 21 23 37 19 IL 22 37 59 32 49 -34 23 -37 -46 -53 -66 -85 -37 (8) Together 231 203 41 91 626 242 195 679 519 875 951 644 413 1252 1314 1352 1702 1207 J A 19 A I C A P E B u STI A N Z S A N I A I. ExtermaI Shocks (1) Teese of Trade Effects 77 200 185 71 75 122 -55 567 370 216 163 252 148 224 45 45 M52 171 (2) Export Volume Effects 10 83 122 161 237 123 66 142 166 218 253 169 9 42 31 60 66 42 (3) Together 87 283 307 236 312 245 11 709 537 632 415 421 157 266 76 105 458 212 It Adjltessse t Eaternal Pi.nsclog -43 91 32 -138 -99 -33 227 1459 931 465 245 665 197 217 -63 -20 421 151 (5) Inrreaae To SEport Market Shier. -36 12 -97 -119 -169 --82 -128 -189 -181 -8 123 -77 -93 -57 -79 -120 -138 -98 (6) Import Subotitotfox 103 39 107 302 180 146 -74 -552 -221 -69 -25 1L67 41 83 202 231 160 143 (?) Effect of toweet GDP Groeth Rate 64 141 265 211 400 216 -14 -9 8 44 72 20 12 24 15 14 16 16 (8) Together 87 283 307 236 312 245 it 709 537 432 615 421 157 268 76 105 458 212 I N DOSSN S T A t V70 R1 CO0A ST 8 1 0 E R I5 A 1. Ecteroal Shocks (1) Terms of Trads Effects -3574 -2690 -3311 -5200 -5162 -3987 -178 -41 -304 -688 -687 -360 -5677 -3584 -4884 -4446 -1693 -4053 (2) Export Volsme EffecEs 101 441 388 591 823 669 64 129 11 205 213 -145 78 570 505 768 1068 598 (3) Together -3673 -2250 -2923 -4609 -4358 -3518 -114 88 -191 -482 -274 -195 -5,600 -3019 -6359 -3678 -625 -3455 52. dAistAs.ion est Paternal Pleaxclng -3176 -1988 -2518 -4325 -4631 -3326 -278 -15 -587 -498 -188 -258 -5570 -1131 -1576 -63 3196 -1029 (5) iscreaxe in Expot Market Share 333 841 406 702 1049 386 120 120 171 197 209 165 -124 -298 484 -32 -326 -173 (6) Soport Substitution -565 -667 -?37 -883 -626 -686 18 -54 -64 -173 -259 -10, 239 -1639 -2603 -3315 -3301 -3204 (7) Effects of Loser CDP Grweth Bate -66 -44 -74 -103 -130 -94 22 28 9 -6 34 5 -165 54 -97 -67 6 -50 (8) Together -3473 -225,0 -2923 -4609 -4338 -3516 -114 88 -181 -682 -274 -195 -5600 -3014 -4359 -3678 -625 -3455 Snurces.: See Appendix Teble I Gross National Prdxct - Wforld Bank dats base Note: Numbrer may not add doe to rounding. Table 18 Ralac.. of Payments Effects of laternal Shocks and of Policy Responses to These Shocks (p .... t) 1974 1971 1976 1977 1978 1974-78 1974 1973 1976 1977 1978 1974-78 1974 1975 1976 1977 1978 1974-78 EG YP T MO0RO0C CO TiN IS 1A I. External Shocks (13)Y Termsof Trade Effects/Average Trade 4.4 59.2 53.2 72.6 120.2 88.4 -24.9 10.8 67.2 67.8 59.2 34.3 -22.9 29.0 32.8 37.5 52.9 28.2 (14) Tense of Trade Effects/GOP 0.9 14.5 10.5 14.2 25.9 14.3 -3.6 1.6 6.3 9.6 7.6 4.9 .4.4 6.9 5.9 7.3 10.2 3.2 (13) Export Volume Effects/Exports -0.7 17.7 24.3 24.2 44.5 22.2 2-0 16.5 16.7 20.6 23.3 15.6 6.5 28.9 25.6 31.6 34.5 25.4 (16) Export Volume Effects/GNP -0.1 2.1 2.4 2.2 3.5 2.2 0.2 1.4 1.3 1.8 1.9 1.3 0.9 3.0 2.6 3.3 3.7 2.8 (17) laternal Shocks/GNp 0.8 16.6 12.9 16.4 29.3 16.5 -2.4 3.0 7.6 11.1 9.3 6.1 -2.5 7.8 8.4 10.5 14.0 8.0 (118Y&ditonal Net Zaternol Ftenanci/Averag. Trade 81.2 171.3 176.6 213.6 273.8 196.8 0.8 77.4 107.9 142.7 116.0 92.3 5.2 70.4 99.6 101.6 116.9 80.7 (193 AdditIonal Net External Floaoctls/GNP 17.2 43.3 34.9 41.7 59.4 41.2 0.1 11.3 14.6 20.1 14.9 12.8 1.0 11.7 16.0 19.5 22.7 14.9 (20) Increase lo Export Mocket Shares/Exports -34.8 -21.2 -23.8 -42.9 -34.0 -31.4 -1.9 -16.4 -17.6 -22.9 -18.7 -13.2 15.0 13.1 3.1 8.0 16.0 11.3 (21) Impct Sobtttltuio Kffeet/mp-rte -41.3 464.7 -67.7 -74.2 -80.8 -68.8 -16.6 -27.3 -16.3 -23.5 -10.4 -19.1 -23.6 -16.4 -24.8 -30.6 -29.9 -23.8 (22) Effects of L-esr GNP Grwuth/Imports -3.6 -0.9 2.2 2.2 2.0 1.3 -1.9 -6.0 -12.2 -11.7 -11.8 -9.1 -2.6 -6.6 35.9 -4.6 -7.2 -3.5 K E N YTA T AG I . 4 N D P H I L I P P 1 8 E S I. Eaternal Shocks (123 Tense of Trade Effects/Average Trade 50.4 33.6 2.3 3.8 114.0 40.3 11.9 37.8 28.0 40.3 40.1 32.6 17.4 62.2 62.2 36.7 61.1 12,1 (16) Term. of Trade Effects/Gift 9.1 5.7 0.4 0.6 13.7 6.5 1.6 6.7 3.8 5.8 5.5 4.4 2 .1 7.3 8.0 7.0 7.6 6.5 (1 5) Export BoSom Effects/Exports 3.3 12.0 7.5 19.2 23.6 13.0 1.1 9.4 1.3 S.C- -3.1 4.0 11.8 17.3 10.0 15.9 16.3 16.6 (163 Export fol1m Effects/GOP 0.3 1.6 1.0 2.3 2.3 1.6 0.1 1.0 0.2 0.4 0.6, 0.5 1.2 1.8 1.2 1.9 2.9 1.6 (17) E.t.r-l Shock./GNP ~~9.6 7.3 1.4 2.9 18.2 8.1 1.7 3.7 6,0 6.3 6.1 4.9 3.2 9.2 9.1 8.9 10.) 8.4 TThTX3iTiii1 Nt Externa Pi-anclg/Aevrage Trade 37.8 18.2 -26.0 -4.9 89.5 22.5 4.4 21. 7 -16.5 6.0 6.0 3.9 44.7 89 .7 78.6 67.9 96.2 76.6 (19) AddleOusol Net External Plnanclog/GNP 6.8 3.1 -4.2 0.8 22.3 ----3j 0.6 2.7 -2.2 0.9 0.8 0.3 3.3 20.8 20.2 8.3 22.0 9.4 (20) Increase Is Export Market ih-Are/Eports -1.6 -1.9 -8.2 -11.2 -21.0 -8.7 1.3 3.0 21.3 25.5 25.3 17.3 -7.8 -0.4 6.9 11.8 10.1 2.1 - (213 Inport SobttltuIoo Effects/Imports 10.0 17.6 28.9 21.5 46.2 24.8 4.1 14.7 22.7 10.7 16. 7 13.9 -7.4 48.2 . -9.8 -3.6 -15.0 -9.0 (22) Effects of L-eo N GOP roth/Tmporcs 3.6 4.0 6.7 3.0 1.6 3.8 2.0 3.4 1.9 2.2 -2.3 1.2 -2.1 -2.5 -2.6 -3.4 -3. 5 -2.9 J AM A I C A P E toU TA N8 Z2 AN I A 1. External Shocks (I13) Terms f Frode Effecto/A"rerag Trade 16.4 39.6 47.0 21.0 22.3 29.17 -6.0 50. 7 38.0 21.9 15.9 23.1 65.2 68.3 15.1 16.2 117.2 14.6 (143 Terms of Trade Effects/GOP 3.9 10.4 10.6 3.7 4.4 6.3 -0.7 7.1 4.6 2 .8 2.1 3.2 6.7 9.8 1.8 1.7 14.3 7.0 (133 Export Volum Effects/Exports 2.4 19.3 35.9 46.4 78.5 33.7 7.7 18.6 20. 8 32.3 22.3 18.6 4.2 17.1 12.5 30.0 33.5 18. 7 (16) Export Volume Effercs/GNP 0.5 4.3 7.0 7.9 14.0 6.5 0.9 1.8 2.1 2.6 3 .3 2.2 0.4 1.8 1.3 2.3 2 .4 i.7 (17) External Shocks/GNP 4.4 14.7 17.6 11.6 18.5 13.1 0.1 8.9 6.7 5.6 5.5 5.4 7.1 11.6 3.1 4.0 16. 7 8.6 (183 Addtina Nt Exe Faitasrcig/Avefoae Trade -9.1 18.1I 8.1 -44.0 -29.4 -8.6 24.7 130.3 93.6 67.5 23.8 66.3 60.2 66.2 -21.2 -7.1 123.8 48.1 (19) Additional Net External Flnanciog/GIIP -2.2 4.7 i.8 -7.8 -3.9 -1.9 2.9 18.3 11.6 6.0 3.2 8.3 8.9 9.5 -2.3 -0.7 15.4 6.1 (20) Increas.e in Export Market Sharee/Exports -9.0 2.8 -28.6 -34.4 -56.0 -22. 5 -14.9 -24.7 -22.6 -0.8a 10.8 -8.4 -44 .8 -23.7 -31.9 -60.3 -70.2 -44.0 (21) Iport Sobtitution Effects/Imports 18.9 6.6 23.9 81.9 48.7 31.6 -7.5 -37.5 -19.2 -7.1 -2.7 -17.1 9.6 19.9 59.1 I 64.6 33.9 35.5 (22) Eff.re. of L-.s GOP Groth/I,poots 11.7 34. 31 9.2 57.1 108.1 46.8 -1.4 -0.6 0.7 4.3 7.8 1.9 2.8 5.6 4.4 3.9 3.3 6.0 I N DONE SIA I VOR Y 0 CA ST NI CER IA I.External Shocks (133-T-e-rms of Trade Effects/Average Trade -137.7 -99.8 '112.6 -138.3 -149.8 '133.3 -23.7 -5.5 -36.5 -75.1 -67.3 -40.2 -231.9 -120.9 '12 5 .3 -99.6 -38.6 '112.9 (14) Terms of Trade Effects/GNP -13.2 -10.8 -12.5 -18.3 -17.0 -14.9 -5.0 -1.1 -7.4 -15.3 -9.8 -8.1 -22.1 -13.9 -14.9 -14.6 -5 .3 -14.2 (13) Export Volume Effecte/Exports 3.9 17.4 14.2 19.6 24.6 16.5 8.2 16.7 12.9 23.8 13.1 17.2 3.0 26.6 19.2 29.0 66.4 24.2 (16) Expsrt Volum Effects/ON? 0.4 1.8 1.5 2.1 2.7 1.8 1.8 3.4 2.7 4.6 4.3 3.3 0.3 2.2 1.8 2.5 5.3 2.1 (17) External Shocks/GRP -14.8 -9.1 -11.0 -16.2 -14'.3 -13.2 -3.2 2.5 -4.6 -10.8 -3.5 -4.7 -21.8 -11.7 -15.2 -12.1 -2.0 -12.1 IT813TXlkI IT .. External Financing/Average Trade -128.7 -98 12. -1.5 148 -3.2 401 -2.0 -36.8 -34.4 -18.3 -30.3 -247.1 -82 -40.6 -1.4 7. -28.6 (193 AdditiounlNet External Pinancina/GOP -13.2 -10.8 -12.5 -18.3 -17.0 -14.9 -7.9 '-O.4 -7.4 -11.1 -3.8 -6.2 -21.7 -4.4 -5.5 -0.2 10.0 -'3.6 (20) Increase In Export Market Rhar.s/Exports 12.8 17.3 14.9 23.5 31.4 20.6 13.3 16.8 19.3 22.8 22.6 19.6 -4.7 -13.9 -3.2 -1.2 -14.2 -7.0 (21) Import Substitution Effects/Imports -21.7 -23.3 -23.3 -24.9 -17,6 -22.1 3.0 -7.5 -8.1 -18.0 -22.8 -12.6 12.6 -43.3 -50.7 -56.0 -54.0 -46.7 (22) Effects of Lmser GOP Grssth/Imports -2.3 -1.5 -2.4 -2.9 -3.7 -2.7 6.4 3.8 1.2 -.0.6 -3.1 0.5 -7.7 1.4 -1.9 -1.1 0.1 -1.1 Sources: Table IA end World Bank datea base. - 18 - only from 19 percent in 1973 to 23 percent in 1978. And while larger increases are shown in the net external debt ratio as Kenya was drawing down reserves, both gross and net debt service ratios fell to a considerable extent. In avoiding high-cost investment projects, Kenya was able to reduce the incremental capital-output ratio from 3.8 in 1970-73 to 3.4 in 1973-76 and 3.2 in 1976-79, although the 1963-73 ratio of 2.6 was not again reached. With domestic savings ratios rising above 20 percent of GNP, economic growth accelerated after 1976, attaining the 6.5 percent GNP growth rate observed in the 1963-73 period. The Philippines and Thailand, two East Asian countries with similar per capita incomes and export composition, showed considerable differences in policy performance in the post-1973 period. Whereas in the Philippines additional net external borrowing exceeded the balance-of-payments effects of external shocks, in Thailand domestic policy measures carried the brunt of the adjustment and additional net external financing remained at low levels. Thailand experienced considerable increases in export market shares, import substitution, and, until 1977, savings in imports associated with a slight deceleration in the rate of economic growth as compared to the 1963-73 period. Increases in export shares were smaller in the Philippines, which exhibited negative import substitution and increases in imports due to a slight acceleration in the rate of economic growth. Thailand increased market shares in its traditional exports by one-third, on the average, with gains shown in sugar, crustaceans and molluscs, tin, and rubber, and losses in rice, maize, and jute. But the largest increase occurred in tapioca that is classified among nontraditional primary exports due to the lack of comparable world market figures. The exports of tapioca - 19 - rose fourfold during the period under consideration, accounting for 12 percent of Thailand-s total exports by 1978. Manufactured exports also increased rapidly, with Thailand's market share rising by nearly one-half. These changes occurred in the framework of a relatively open economy; there was little discrimination against exports, the exception being rice that was subject to tax. The openness of the economy also led to relatively efficient import substitution and to a decline in incremental capital-output ratios. With increases in the rate of investment following the granting of investment incentives, the GNP growth rates of the 1963-73 period were surpassed after 1975, and the average for the 1973-79 period (7.6 percent) was only slightly below that for 1963-73 (7.7 percent). Thailand's balance of payments was adversely affected, however, by the decline in earnings from the Vietnam war and from private transfers, necessitating increased reliance on foreign borrowing. As a result, the ratio of gross external debt to GNP rose from 7 percent in 1973 to 11 percent in 1978, and the gross debt service ratio increased from 21 percent to 29 percent. The Philippines lost market shares in its traditional exports as declines in sawn logs, sugar, copra, and copper ores were not compensated by increases in edible nuts and coconut oil. However, it gained market shares in nontraditional primary exports, due to increases in the exports of bananas, canned pineapple, iron ore, and silver. Finally, it experienced a rise of export shares in manufactured goods by about one-third. On the average, export market shares increased by one-tenth in the Philippines as compared to a one-third rise in Thailand. Smaller export increases may be explained by higher industrial protection in the Philippines that biased the system of incentives against exports. And, increases in - 20 - manufactured exports were even smaller in net terms as much of the increase was concentrated in export processing zones where domestic value added is low. High levels of protection notwithstanding, the Philippines experienced negative import substitution. This may be explained by the imported input needs of import substituting industries and of export production, the high import content of rising investment, and the increase in imports associated with the appreciation of the real exchange rate to an extent much exceeding that of Thailand. The rising cost of domestic production behind high protection also raised incremental capital-output ratios in the Philippines. While these ratios were only one-tenth higher in the Philippines than in Thailand in 1963-73, the difference in the ratios averaged one-fifth in 1973-79 and it reached two- fifths by the end of the period. Despite its higher investment share, the average annual rate of growth of GNP was nearly one-fourth lower in the Philippines than in Thailand in the 1973-79 period. At the same time with domestic savings accounting for about 25 percent of GNP in both countries, its higher investment share necessitated greater reliance on foreign borrowing in the Philippines. Correspondingly, its gross external debt ratio increased from 16 percent to 28 percent and the gross debt service ratio from 23 percent to 42 percent between 1973 and 1978. Jamaica, Peru, Tanzania Given the importance of coffee in its exports, the pattern of the balance-of-payments effects of external shocks in Tanzania was broadly similar to that in Kenya, declining from 7 percent of GNP in 1974 to 3 percent in 1976, and rising again to 17 percent in 1978. In turn, with some variations due to the world business cycle, the balance-of-payments effects of external shocks increased from 4 percent of GNP in 1974 to 19 percent in 1978 in - 21 - Jamaica, where the rising export shortfall in bauxite and alumina was only partially compensated by improvements in the terms of trade after 1974. Finally, largely due to changes in copper prices, the balance-of-payments effects of external shocks rose from nil in 1974 to 9 percent of GNP in 1975 and declined to 6 percent by 1978 in Peru. The adverse effects of external shocks in the three countries were aggravated by internal shocks resulting from government policies that gave rise to considerable economic dislocation. In all three countries, the impact of internal shocks was most apparent in the decline of domestic savings ratios and export market shares. In Jamaica, the share of domestic savings in GNP fell from about 25 percent prior to the installation of the Manley government in 1972 to 10 percent in 1976-77, followed by an increase to 16 percent in 1978 which proved to be temporary. Increased government intervention in economic life, the widespread application of quantitative import restrictions, and the decline of confidence on the part of domestic and foreign investors all contributed to this result. While favorable changes in the terms of trade aided economic activity in Peru until 1974, the chaotic management of state enterprises, the overvaluation of the currency, increased protection, and political and economic uncertainty under the military regime of General Velasco created increasing economic difficulties. These were reflected in the fall in the domestic savings ratio from 16 percent in 1970-71 to 11 percent in 1974-75. Little immediate improvement occurred following the installation of the government of General Bermudez in 1975, but savings ratios increased to 17 percent in 1978 and 24 percent in 1979 in the wake of the May 1978 policy package that included a large devaluation, the adoption of the crawling peg, - 22 - as well as restraint on government spending. In Tanzania, the Arusha declaration of 1967 called for increasing government intervention in economic life and for reorganizing agriculture. The Ujama village movement was launched shortly thereafter, but the acceleration of the villagization program began only in 1974. These developments, together with the expanded role of the government in conjunction with the 1972 reorganization of the public sector and the establishment of new parastatals, adversely affected savings in Tanzania. The domestic savings ratio declined from 17 percent in the early seventies to 9 percent in 1974-75 and 7 percent in 1978-79, with a temporary increase to 16 percent at the time of high coffee prices in 1976-77. The three countries experiencing internal policy shocks also suffered a considerable decline in their export market shares. With increased import protection and the reduced use of price incentives, Jamaica's market share fell by 56 percent, on the average, while Tanzania experienced a decline of 44 percent, only part of which is explained by the disintegration of the East African Community. In turn, a decrease by 23 percent in 1976 gave place to a gain of 11 percent in 1978 in Peru, due to the rise of manufactured exports in response to policy changes and, to a lesser extent, increased exports of petroleum. In Jamaica, declines in market shares were shown for all traditional export products as well as for all major commodity groups. Shortcomings in the management of the publicly-owned Banana Company, the poor performance of the newly-established sugar cooperatives, and the adverse reactions of foreign companies to the 15 percent tax imposed on bauxite in 1974 led to losses in market shares amounting to 45 percent in bananas and 27 percent in sugar, bauxite and alumina in 1978. In the same year, Jamaica experienced losses in - 23 - market shares of 75 percent in nontraditional primary exports and 60 percent in manufactured exports. In the latter commodity group, losses were even larger in developed country markets as the establishment of CARICOM led to a shift of exports to the partner countries. In response to increased political uncertainty, the growth of tourist earnings also slowed down and workers remittances declined in absolute terms. Losses in export market shares amounted to 10 percent of Jamaica's GNP, and equalled one-half of the balance-of-payments effects of external shocks. Furthermore, while the data appear to indicate the existence of considerable import substitution, reductions in import shares were not associated with the expansion of domestic production. Rather, output declined as losses in export earnings, together with increased difficulties encountered in borrowing abroad, gave rise to foreign exchange shortages in Jamaica. The decline of domestic output began in 1974 and continued every year thereafter. GNP fell 4.8 percent a year, on the average, between 1973 and 1976 and 1.8 percent a year between 1976 and 1979 as against a rate of growth of 5.7 percent in the 1963-73 period and 5.9 percent between 1970 and 1973. Apart from increasing economic inefficiencies, the decline in the share of gross domestic investment in GDP from 28 percent in 1971-73 to 21 percent in 1974-76 and to 13 percent in 1977-79 contributed to this outcome. Until the lack of creditworthiness practically eliminated foreign borrowing, the fall of the investment rate was slowed by the inflow of foreign capital, which was relied upon to alleviate the adverse balance-of-payments effects of external shocks and of losses in export market shares. As a result, Jamaica's gross debt service ratio rose from 11 percent in 1973 to 22 percent in 1976 while the ratio of gross external debt to GNP increased from 18 percent to 43 percent. With the need to finance amortization and interest Table 2 (to.oo the 6.:e:of1 84.o..tcU Co A' ;a..R Avetag. A-n.g. 1971 1972 1973 '1972- 1974 1975 1976 1977 1978 1974-78 1971 1972 1973 '1972- 1974 1975 1976 1977 1978 1974-78 1971 1972 1973 "1972" 1976 1979 1976 1977 1978 1974-78 R6C1 P T 801R0 C Co0 TIUN I I I A Itamest Receipts 1 I I 1 1I 81 67 102 113 73 14 13 14 14 24 28 23 30 25 27 3 a 18 10 36 36 23 12 19 25 lot o...t PoYmmo:. -74 -69 -125 -89 -153 -176 -257 -304 -394 -237 -41 -47 -42 -43 -64 -35 -85 -147 -249 -116 -21 -22 -37 -27 -38l -66 -70 -84 -125 -77 DivIdeods 0 -1 0 0 2 -1 2 11 16 6 -20 -24 -41 -28 -33 -39 -37 -42 -60 -42 -12 ".38 -79 -43 -93 -89 -119 -107 -105 -103 0tb.. Facto, Paymente 0 0 0 0 0 0 0 0 0 0 -27 -31 -63 -34 -65 -229 -711 -702 -745 -490 7 2 -13 -1 1 -4 .12 0 1 -3 Officlal Toao.f... 268 290 635 398 993 986 623 404 319 665 35 30 33 33 30 33 4 14 59 28 26 32 41 33 26 42 35 51 35 42 Di ...tl1,..t-.et 0 0 0 0 0 a8 1 105 318 98 23 13 -1 12 -20 0 38 57 68 25 25 33 Ss 38 26 45 110 93 91 75 Pootfoll0 Capital 313 387 387 362 174 1444 652 743 353 470 72 -15 -93 -12 -78 553 1352 1649 1372 970 57 36 74 34 28 113 241 453 482 264 Ex .... ..04 0s.aI.i.. -308 -409 -589 -435 -356 -647 -637 8 144 -290 0 1 8 3 4 -57 9 141 -98 4 -3 4 7 3 -13 -4 18 -49 -4 -11 M.as..e in R....... 59 -15 -170 -42 170 -22 147 -41 74 44 -36 -49 4 -27 -131 28 1 -9 1s -19 -83 -48 -79 -77 -90 18 16 82 -69 -9 Not 9.t-,oa1 FI-aci.9 _W3 71 _1 -711 -uw- -1-M7T - -lUf _W! TM3 -iif =1U7 -_I- "=17 :3w -xz- _ 6 t w -31 -- "=T __ -**=i ***=7 "=1 -W 711 -lI 37! 71! Total Eot*Ooal Pi.anciog 333 254 264 284 982 1832 893 1321 1361 1282 81 -36 -82 -12 -232 358 718 1200 678 544 32 68 108 63 16 244 451 642 555 382 K R RY A T HR A I L A N ND P RN I L I P P I N ES lot*test Receipts 16 34 27 26 38 47 24 32 42 37 65 55 65 42 132 182 141 134 153 148 13 22 61 32 160 138 123 138 179 152 lot ....t PaYment. -14 -70 -129 -71 -139 -75 -68 -4A -53 -76 -49 -56 -75 -60 -125 -152 -165 -189 -374 -201 -91 -115 -119 -108 -146 -222 -246 -301 -439 -271 DI,14s.d4 -27 0 0 -9 0 -68 -94 -132 -132 -85 -13 -14 -11 -13 -9 -25 -17 -18 -14 -17 -23 -33 -55 -37 -69 -41 -132 -157 -164 -113 0th.: Ta.tto P.7ment. 3 -16 -15 -9 -8 -22 -30 -19 -18 -19 198 237 223 219 192 132 77 48 109 116 56 95 133 99 94 105 126 118 548 202 Official TZ..efete 71 40 39 50 45 65 39 75 91 63 37 29 27 31 26 24 IA 18 35 24 100 107 136 114 136 153 120 116 120 131 Di0.. 01 -tove.tet 12 0 0 6 0 17 46 57 57 35 39 68 77 61 189 86 80 106 51 102 46 -21 54 9 6 97 126 209 163 120 PottfOllo C.Pital 40 100 141 94 223 180 166 166 382 224 57 126 242 142 327 384 455 954 1373 701 248 304 158 237 943 1016 1068 789 2043 1156 E.r... .od Oeisslona -11 -8 7 -4 -3 -17 -8 -1 11 -A4 61 54 -34 20 36 52 -15 43 -239 -24 -142 -104 -19 -89 -70 -198 -145 -201 -172 -155 Ch.no.. i 1. aax.ve. 70 -24 -22 8 88 48 -85 -280 205 -3 17 -197 -219 -133 -475 84 -79 -9 -36 -103 -07 -183 -668 -316 -590 -2 53 30 -876 -277 Net Etena-l Fioaoclo N1 31 1 7 11 "77 7! 1 1 *Il tl! 17 71! -7 -37! -f -717 II! 17O17 TM1 '77 "_31 -7 _M7 17g 716 TM1 TM1 3!1 171 1 Total Enteonal nloaocino 201 128 177 169 383 316 152 30 768 330 474 372 361 402 437 964 677 1294 1447 964 172 208 -125 85 615 1339 1473 1399 1825 1330 J AN A ICA P6 RU0 T AN ZAR IA Iot.reot Recepts 13 14 18 16 23 22 12 10 9 16 19 13 25 19 38 34 10 13 i5 22 10 10 20 13 17 9 7 11 19 13 Iant.est 7a7w.et. -11 -16 -26 -18 -46 -65 -77 -109 -96 -79 ".94 -87 -108 -96 -168 -261 -337 -381 3507 -331 -13 -12 -19 -13 -01 -12 -7 -8 16 -12 D1,idend. -122 -124 -125 -124 -48 -59 -50 -39 -92 -57 -30 -47 -80 -59 -42 -13 -44 -33 68. -48 0 0 0 0 0 0 -19 -24 -8 -10 Oth.t Fatto. P.s.ent. 27 30 32 30 32 28 31 11 13 23 -14 -13 -16 -14 13 -17 -13 -25 -23 -18 2 5 1 3 1 9 18 I8 24 14 Official Tt ... feo -3 -7 -7 -6 -9 5 4 3 11 3 37 33 38 36 26 33 -53 54 54 44 2 10 19 10 61 91 44 97 143 87 DI..ctl,veetasot 173 97 73 115 31 -2 -1 -7 -27 -1 28 24 70 41 58 316 170 54 25 125 0 0 0 0 0 0 0 0 0 0 Poot fdlio Capital 0 73 140 71 146 325 153 108 34 153 -88 104 325 114 1136 920 1036 1046 138 853 100 103 133 113 139 224 32 162 221 162 ...OTe and 0.6.10.. 17 -5 4 5 -15 -83 -33 -48 26 -31 16 -88 -41 ".38 -72 -191 -329 ".109 54 -129 -14 11 5 1 10 -12 3 69 72 28 Chagn- 1, .R.O.t... -20 31 30 14 -70 43 184 14 53 45 48 -9 -92 .18 -397 495 314 -65 -19 66 13 -50 -32 -23 137 15 -22 -160 171 28 Met.E !.taoa I iocing M --" -MI "11 -h! !17 71! --3! --U -7n __1 _6 1T7 =! _W 1314 8F6_2 "lI _-347 lI! _W1 7!" _11 _16! "31 "37!6 -76 176 7 "311m Total Eate:eal ?i-an:n 209 233 280 244 140 338 330 83 119 208 46 66 311 160 776 1590 1243 968 244 964 113 91 148 117 364 338 102 197 460 532 I 8 0D 0 8 8 S I A I V10 R Y C 0 A S T 8 I IC 69R 1 A In.:ag.. Receipts 0 0 38 13 127 44 50 31 58 46 8 7 a 8 14 23 11 24 36 22 13 14 25 17 155 301 443 350 292 348 laws:e" Payments -2 -3 -45 -17 -52 -46 -70 -70 -78 -67 -17 -23 -36 -23 -45 -65 -79 -106 -177 -94 -14 -24 -15 -18 -18 -23 -21 -26 ".44 -24 DtiIdend. -171 -342 -584 -366 -1277 -1320 -1142 -1615 -1941 -1459 -42 -42 -78 ".54 -71 -98 -90 -113 "164 -107 -336 -471 -968 -732 -702 -759 -711 -838 -481 -702 Otha: Facto: Payment. -20 -16 -13 -17 -17 -27 -37 -63 -43 -33 9 9 5 8a 4 -8 -23 -33 -49 -22 -5 -29 -30 -21 -432 -657 -470 -273 -114 -350 Official Tzs.mf.:. 46 51 33 51 49 27 15 25 14 26 39 61 54 51 67 42 31 44 33 39 27 23 1 18 -7 -15 6 -3 -20 - 010.0: Invest...: 139 207 15 120 -49 676 344 233 279 257 16 19 5 29 3 81 3 6 3 9 0 7 2 257 419 339 439 1899 32 Pootfollo Capital 298 447 722 6.89 455 -121 1631 866 1429 856 70 3 172 82 106 205 226 323 956 364 198 -30 -116 17 -327 -231 -406 -100 1579 83 boo.w and Omloasons -94 36 77 13 -314 -104 -182 -55 -135 -158 -4 3 -12 -6 -20 16 9 -57 -51 -21 93 7 -48 14 71 -62 43 -56 -126 -22 Chaogee In Rs.:.ee 29 -377 -340 -229 -689 858 -903 -999 -150 -377 23 71 0 31 -58 84 -23 -127 -182 -61 -160 61 -201 -100 -4898 -187 379 823 2130 -351 Not 6nt.ona Hassanin 77! --f:7 3! -T71 71! !7r -M 111 71 1 117 "371U "1179 "373 11 315 I7 16 111 135 -17Tm 1 7 1 1T "3 1 31 Total EUt-oa Financing 398 348 552 639 -438 1133 938 80 1452 637 161 173 278f 204 128 643 266 179 780 359 442 333 4 266 -3181 -13 336 1078 3928 30 Sourc...: loteratlona Nost-:Y Pond, Balance of Payee,t. Yteabook,. t.ooatiooal Fioaneti. Statistics, variou I ...... Note: Total gzt.ooal Fna-ing is tha eoa of net ..t-Ia fi-ninl, intsest paymet. .0d dIvIed.nd. Table 3 Nominal and Real Interest Rates, the Goverment Budget and the Money Supply 1971 1972 1973 '1972' 1974 1975 1976 1977 1q78 1971 1972 1973 '1972' 1974 1975 1976 1977 1978 1971 1972 1973 '1972' 1974 1975 1976 1977 1978 KG Y PT MO0 R OC CO T U N I S I A Nominal interest Rates 5.0 5.0 5.0 5.0 5.0 5.0 6.0 7.0 8.0 3.5 3.5 3.5 3.5 4.5 4.5 4.5 4.5 4.5 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.75 5.75 Real Interest Rates 4.9 3.6 -1.7 2.3 -13.2 -2.3 -1.7 -2.1 -5.9 -0.7 -0.3 0.7 -0.1 -11.1 -3.1 -3.7 -7.2 -4.7 -3.9 3.3 0.1 -0.2 -8.4 3.5 1.7 -1.2 2.7 Governwent Revenue 34.0 36.3 36.8 41.2 41.3 18.8 17.6 16.9 17.8 21.1 20.2 24.2 20.0 25.0 26.2 28.6 2R.7 30.2 32.3 Government Expenditure 48.0 60.2 52.9 54.0 61.8 21.8 22.0 18.5 20.8 25.2 37.4 40.6 31.2 26.0 26.8 29.8 11.4 35.1 34.9 Budget Surplus (Deficit) 14.0 23.9 16.1 12.8 20.5 -3.0 -4.4 -1.6 -3.0 -4.1 .17.2 .16.4 -11.2 -1.0 -0.6 -1.2 -2.7 -4.9 -2.6 Changes In Money Supply - Nominal 8.1 16.9 21.8 15.6 24.7 23.9 20.2 31.4 20.7 11.9 18.5 17.0 15.6 26.6 18.1 18.1 19.2 15.6 25.2 15.4 16.1 18.9 25.1 17.6 9.1 12.1 10.S - Reel 8.0 15.4 14.0 12.5 9.0 15.3 11.5 20.3 5.2 7.4 14.1 13.9 11.8 7.8 9.5 8.9 5.9 5.4 14.5 13.5 10.8 12.9 9.2 8.1 4.7 4.6 16.1 KR8 NTY A TN A IL AND P N I L I P P IN KS Nominal Interest Rates 9.0 8.0 10.0 9.0 11.0 10.0 9.0 9.0 12.5 10.0 10.0 10.0 10.0 6.0 6.0 6.0 6.0 4.0 Real Interest Rates 10.0 -1.3 -11.3 -0.9 -15.5 5.7 4.0 2.8 5.3 -5.2 -5.0 -9.0 -6.4 -29.8 3.7 -3.6 -4.7 -3.5 Government Revenue 16.9 18.1 16.4 17.1 17.3 19.7 18.2 16.5 23.1 13.7 13.1 12.6 13.1 14.0 13.1 12.9 13.8 13.7 11.8 10.8 14.5 12.4 17.7 18.8 15.8 16.1 16.9 Government Expenditure 19.2 22.7 19.8 20.6 19.6 24.3 23.9 19.3 25.3 18.8 17.5 15.0 17.1 13.3 15.6 17.7 16.9 16.5 12.2 12.6 11.6 12.1 15.3 19.6 17.5 17.8 18.3 Budgat Surplus (Deficit) -2.3 -4.6 -3.4 -3.4 -2.3 -4.6 -5.7 -2.8 -2.2 -5.1 -4.4 -2.4 4.0 0.7 -2.5 -4.8 -3.1 -2.8 -0.4 -1.8 2.9 0.2 2.4 -0.8 -1.7 -1.7 -1.4 Change In money Supply - Nominal 7.4 17.0 27.5 17.3 4.0 23.0 23.0 48.5 10.4 10.2 26.4 21.0 13.9 9.3 6.0 16.8 9.2 19.4 16.3 29.1 12.3 19.2 24.0 14.3 17.1 23.7 13.4 - Reel 1.9 13.5 15.3 10.2 -11.9 -5.0 12.2 29.3 -5.6 11.2 6.3 -2.5 5.0 -16.7 1.9 11.5 3.0 11.8 0.2 11.5 -7.1 1.5 -17.7 12.0 6.4 11.3 5.3 J A M A I C A PR I R U T A N Z A N I A Nominal interest Rates 5.0 6.0 7.0 6.0 9.0 8.0 9.0 9.0 9.0 9.5 9.5 9.5 9.5 9.5 9.5 12.5 14.5 28.5 Real Interest Rates 0.4 1.4 -10.7 -3.0 -12.4 -8.0 -0.5 -2.2 -19.2 2.4 2.2 0 1.2 -6.3 -11.4 -15.7 -17.1 -18.6 Government Revenue, 19.9 19.5 19.1 19.5 20.5 24.5 23.5 25.7 24.4 15.8 15.6 15.0 15.5 15.4 15.9 14.7 15.0 16.3 17.2 16.7 17.6 17.2 18.8 20.8 17.5 16.8 21.3 Governmnt Expenditure 23.8 23.7 24.4 23.6 28.0 31.8 38.5 38.7 40.9 18.9 19.3 19.0 19.1 18.6 21.5 21.1 22.6 21.5 24.6 21.3 22.9 22.9 26.5 32.5 27.3 21.5 28.8 Budget Surplus (Deficit) -4.9 -4.2 -5.3 -4.8 -7.5 -7.3 -15.0 -13.0 -16.5 -4.1 -3.7 -4.0 -3.9 -3.2 -5.6 -6.4 -7.6 -5.2 -7.4 -4.6 -5.3 -5.8 -7.7 -11.7 -9.8 -4.7 -7.5 Change in Money Supply - Nominal 24.5 9.1 21.8 18.5 27.3 20.2 2.4 37.8 17.7 10.2 28.9 25.2 21.4 41.4 17.0 23.8 20.8 45.4 21.0 11.3 16.2 16.2 25.8 24.0 24.5 19.7 7.0 - Real 19.0 4.4 1.7 8.4 2.3 2.4 -6.5 23.7 -12.7 3.1 20.3 14.3 12.6 20.9 -5.3 -5.7 -12.5 -7.9 15.6 3.6 5.1 8.1 5.4 -1.9 16.4 7.4 -4.0 I 90 0 NE S I A I V 0 RI C OAR T N I C F S I A Nominal Intereet Rates 3.5 3.5 5.5 4.2 5.3 8.0 8.0 8.0 8.0 4.5 4.5 4.5 4.5 4.5 3.5 3.5 4.0 5.0 Real1 Interest Rates 5.2 3.2 -5.1 1.1 -10.0 -3.1 -3.7 -15.2 -4.4 -10.0 1.9 -1.2 -3.1 -7.1 -22.6 -15.2 -14.4 -15.6 Government Revenue 12.3 14.1 15.3 13.9 17.6 18.8 19.6 19.8 20.6 13.6 13.3 19.7 15.3 24.7 23.3 22.4 22.4 19.5 Government Expenditure 14.8 16.6 17.4 16.3 18.5 22.1 21.2 18.8 21.1 11.7 11.7 13.4 12.3 15.6 29.2 31.9 14.3 liudget surplus (Deficit) -2.5 -2.3 -2.1 -2.4 -0.9 -3.1 -1.6 1.0 -0.5 1.9 1.6 6.3 3.3 9.1 -5.8 -9.5 5.2 Change in Money Supply - Nomina 27.6 48.3 41.6 39.2 37.8 37.9 25.6 25.3 24.0 10.2 12.1 14.3 12.2 38.0 10.5 44.6 47.3 8.5 4.3 11.5 23.9 13.2 51.1 85.5 44.6 38.1 1.7 - Real 22.2 39.4 7.8 23.1 -2.0 15.7 4.8 12.8 15.1 12.0 11.7 2.8 8.0 17.7 -0.9 29.0 15.6 -4.0 -10.2 8.7 17.2 5.2 34.3 38.8 18.5 13.7 -19.2 Sources: International Monetary Fund. International Financial Statistics. varioua Issues. Note: Government Finance for Egypt end for 1976-78 period for Morocco are from World Sank Reports. ..Poa voo" P" P -*"I om ii m elt.io otito-s '--pisl jto4 TjouioT . it-tem tsttnhi-iltiii ini'p ri- Ni --1 Vii trio Lii iti~v9 L*iti 0051t 0rogi tins riot1 ni t,i Vi4 triO tOO tOOt t*tOi t-tit triO! vii trOt [,o Vii 5lit tel0 1ito io-lo S-ut1 'set Sn-n i, so se-I IyOu9 'itit soiL t-itt Zi-o ooot1 i'tM otlot VtOal iZitt Viii 900 9i its6 rootI is6 Voo v-cot i-oil s-oct rutt I-to vIEt retD volt1 iiti trio '-'ti * 1.'f JO t 05 it Oi iK it to gt li rg Vt t:ot Pit Icoot! s-sit 0-el1 si-it s-io rio rig6 rowt ruto rot nit1 010 root riz i0 Psi 'rt --t-d *T-STOOt Jil- oiCVO i-to. i,to- ttl. tio. o-ooto K-is i*iso tilot t9rO IV-So i-tom zVts ws vg-ost go-Lsco iit tooIt riot 00oot iot61 OD-SIV re-t 00iot O'isT i*'s554f1ittt I* v0 3A v 9 6I a a0a 0 1~~~~~~~~~~~~~~~~~~~~~~~~tll, 0 e Well ts too 'io roo Wo-ot v-so i-go1 i-tot itt ", t 0-so 6t o-s itt 0-e ittt1 trO.W oo -ifs trii1 WWlI sWto ito0 -ottD rWI riotl r-Ititsaoit* MM ti,-p-S i ioori Cogi- Lm-Es ott-i Mi-1 iistoi iltzi no-i soot-i oi-iii tifi iris 0-tv Lti-s O-sI tiui ipso1 OVoi flito toOtO iNtrO iOt06 EtOOr t5OOl idoirS tloot tO,r £0550 tittt in*l3t o g w I vI 0ttsv S /000 4 /01) tO.I ,.O* III of I 11 00 11 6: 9:92 96 "I vist 0-tai 9116 9- --l-d -T-T."m~~~~~~~~~~~~~~~~~~~~~~~~~~~etist s- si io-..! Ott io si t rt oi 0-o ie I-ist triO tid1 triO11 0i511 g:iE e r -o it i t e i -s -t s-el ei rs lotsIisno ftes 's Sf51i ZD Iot iiit' 6nil- INi't ot C LOt9EII- goiot 9 o o -tt99O i-itt tovLti 6ozit ccolt s-e1 i-tot tonor eoo "iitt MMo uitt iE-Wl l. Sf0 0ot roo- rettti- glt A.- 'I14 *slsli 35 ttut2 COt Ot IOott d I I Mi rt! ott ii i, Ot tit ii ii -tl iot otita on tn -tt iivroIiitoIv iO io io st!coIiritn tv o.t itt i0 0(09 t¶tOt 0-ott s-tst Oo6 i-rot 0i-so ""Io s-tot vs stot olout t-tol roio s-nt i-tol olio s-OKs o-i "I-o 0oot 0-so1 i-w t-oo9 isXieiis 1-l ovst i Pit i 0O ti I-so its6 -otti soso s-tot Otilt o-ut s-t oto -tiv s of ott sf0 LIL0t 10-to riot6 i-n i-to ooG so s-ott i-t i-tot i-ni-iflit et~-si itt sit tit ii i-i 0-elt K iOt ossv fwo oiit1 i-ssl ittt- 6At ttit o-t KII i90-tot " totwi- L1tit riot' i-"Ot mtl' s"Ot iottV' sK-wi poo on ess.sat.io lii ooo is i-s tot -to ott srn s-tt itt 50 rig i-so -n ro 0-e tri Coot i@tt oo 0is s-o s-s sf0 0-el tiO itotvtst SOSi tt0ttJOur bibt L161 9161'4 s:-I :1.1' .1161. UGI tj&l Im L61 LL61 gLbt S.Lfil lifil .1161. Lill 9161 libi Not Idol 9"I S161 WM U61- LLGI 9461sills, 5It i' Table 3 Interest Debt Service and bebt Service Ratios (in US$ millions. rurreot pricee) 19O1 1972 1973 "19,2' 1974 1975 1976 1977 1978 1971 1972 1973 '1972' 1974 1973 1976 1977 1978 1971 1972 1973 "1972" 1974 1915 1976 1977 1978 E V P V TN 0 8 0 C C 0 T 0 N I S I A Gross Debt Service 246 173 213 231 806 748 973 1080 1439 93 123 113 110 122 128 160 268 487 67 88 116 90 109 135 158 180 265 Net Debt Service 245 172 273 230 803 667 906 976 1326 79 110 101 97 94 100 137 236 462 62 80 98 80 73 119 135 168 246 Merchandises Exports 769 823 1117 910 1316 1402 1529 1708 1737 499 634 877 670 1706 1534 1262 1300 1303 216 311 386 304 914 856 789 929 1090 Gross Debt Service Ratio 3i.2 21.0 24.4 25.3 33.2 53.4 63.6 63.2 82.8 18.6 19.4 13.1 16.3 7.2 8.3 12.7 20.6 32.4 31.0 28.3 30.1 29.7 11.9 18.1 20.0 19-4 24.3 Net Debt Service Ratio 31.1 20.8 24.4 25.2 53.1 47.6 39.3 57.3 76.3 15.8 17.4 11.5 14.4 5.3 6.5 iO.9 18.3 30.7 28.7 25.7 23.4 26.3 8.0 13.9 17.1 18.1 22.6 Gross External Debt 3000 400D 3000 3724 8031 9877 1130 1366 1926 2362 3605 5003 903 1033 1143 1292 1924 2600 Net External Debt 2730 3759 4783 5588 7827 9669 863 949 1548 2205 3414 4582 398 614 737 921 1395 2181 Gross National Product 3166 5628 6282 3699 6726 8138 10236 12018 14123 3237 5639 6287 3726 7360 8943 10477 11693 12886 2142 2638 2799 2326 3371 4082 4331 5052 3934 Gross External Debt Ratio 47.8 39.3 61.4 33.9 67.0 69.9 18.0 16.3 21.3 24.3 32.3 36.6 32.3 30.6 26.0 28.4 38.1 43.7 Het External Debt Ratio 43.5 35.9 38.8 34.6 63.1 68.3 13.7 12.9 17.3 21.0 79.2 35.6 21.6 16.2 16.3 20.2 31.6 36.6 K K N I A T H A I L A N 0 P N I L I P P I N K S Gross Debt Service 27 91 139 92 130 90 93 63 81 248 249 313 271 383 491 313 603 1177 381 343 424 363 669 378 662 880 1429 Net Debt Sotvice 11 35 132 66 112 43 69 33 39 183 194 250 209 251 309 372 469 1024 368 321 363 331 309 420 537 742 1250 Merchandise Eapoits 203 338 475 346 641 626 601 1160 937 602 1039 1327 1123 2403 2162 2930 3431 4041 1116 1029 1821 1322 2701 2292 2330 3124 3423 Groes Debt Service Ratio 13.2 23.4 33.3 26.7 23.4 14.3 21.6 3.6 6.3 30.9 24.0 20.6 24.1 13.9 22.7 17.4 17.3 29.1 34.1 33.3 23.3 28.9 24.8 23.2 26.0 26.2 41.7 Net Debt Service Rtatio 3.4 15.4 27.6 19.1 17.3 6.6 6.6 2.8 4.1 22.6 18.7 16.4 18.6 10.4 14.3 12.6 13.6 25.3 33.0 31.2 19.9 26.5 18.8 18.3 21.1 23.8 36.3 Gross External Debt 496 371 623 772 931 1178 862 9991 1199 1607 1930 2677 2023 2392 2963 4384 3443 6847 Met External Debt 263 417 332 393 466 884 -444 -860 -576 -208 96 297 1079 971 1796 3147 4421 5541 Gross National Product 2156 2336 2604 2372 3013 3513 3881 6480 3173 8830 9569 11079 9876 12879 13036 17233 19363 23368 9930 10673 12613 11143 14706 17071 19046 21410 24614 Gross External Debt Ratio 19.0 18.9 17.8 19.9 20.6 22.8 7.2 7.7 8.0 9.3 9.9 11.4 16.1 16.3 17.4 23.0 23.4 28.0 Net External Debt Ratio 10.1 13.8 15.1 15.3 10.4 11.1 -4.0 -6.7 -3.8 -1.2 0.3 1.3 8.6 6.6 10.5 16.5 20.7 22.7 J A H A I C A P E R U T A 8 2 A N I A Cross Debt Service 14 23 41 26 67 90 136 193 200 319 312 489 373 563 694 788 877 1431 37 42 33 44 49 26 35 40 76 Met Debt Service -1 9 23 10 42 68 124 183 191 300 299 464 334 527 660 778 664 1436 27 32 33 31 32 17 26 29 37 Merchandise Exports 335 370 383 363 718 769 618 763 737 893 944 1050 962 1512 1280 1312 1668 2004 249 293 356 796 391 376 692 548 479 Gross Debt Service Ratio 4.2 6.2 10.7 7.2 9.3 11.7 22.0 23.3 27.1 33.7 33.1 46.6 38.8 37.4 34.2 60.1 32.6 72.4 14.9 14.8 14.9 14.9 12.3 6.9 7.1 7.3 13.9 Net Debt Service Ratio -0.3 2.4 6.0 2.8 3.8 6.8 20.1 24.0 25.9 33.6 31.7 44.2 36.8 34.9 51.6 59.3 31.8 71.7 10.8 11.3 9.3 10.4 6.2 4.3 5.7 5.3 11.9 Gross External Debt 383 584 793 1005 1036 1186 2682 3442 4380 3100 6140 6710 499 653 841 938 1139 1160 Net External Debt 274 410 683 1033 1093 1308 2130 2474 3912 4933 3946 6611 344 630 849 943 963 1143 Gross Netional Product 1643 1943 2123 1904 2280 2426 2316 2834 2543 6139 6733 7562 6819 6883 10067 10656 10837 11442 1797 2008 2249 2017 2335 2885 3249 3648 4129 Cross External Debt Ratio 18.1 25.6 32.7 43.4 36.3 46.6 33.3 38.7 43.3 47.9 56.6 38.6 21.8 23.8 29.2 29.3 31.2 28.1 Het External Debt Ratio 12.9 18.0 28.1 43.3 38.4 31.4 28.2 27.9 38.9 46.3 34.8 37.8 13.3 23.6 29.4 29.0 26.4 27.7 1 8 0 0 N A. S I A I v 0 It 1 C 0 A S T N I G t 5 I A Gross Debt Service 101 108 113 107 155 439 633 909 1103 31 87 78 72 118 132 190 276 330 68 62 33 54 36 38 49 86 68 Met Debt Service 101 108 73 95 28 393 38 856 1047 43 80 70 64 102 107 179 232 294 33 48 A 37 -99 -443 -394 -264 -224 Merchadise Exrports 1200 1778 3211 2063 7426 7130 8336 10833 11643 496 396 862 631 1253 1239 1735 2412 2616 1793 2161 3448 2467 9178 7983 10537 11834 10442 Gross Debt Serice Ratio 8.4 6.1 3.5 3.2 2.1 6.2 7.4 8.4 9.3 10.4 14.6 9.0 11.1 9.4 10.7 11.0 sr.4 12.6 3.8 2.9 1.11 2.6 0.6 0.7 0.5 0.? 0.7 Nat Debt Service Ratio 8.4- 6.5 2.3 4.6 0.4 3.3 6.8 7.9 9.0 8.7 13.4 8.1 9.9 8.1 8.6 10.3 10.4 11.2 3.1 2.2 0.2 1.5 -1.1 -3.5 -3.7 -2.2 -2.1 Gross External Debt 3300 6300 8000 10000 11600 13100 637 761 1016 1287 2092 3030 373 679 1136 1218 1083 837 891 Met External Debt 4516 4808 7414 8301 9084 10437 549 709 926 1237 1923 2582 197 96 -4472 -4393 *4120 -3420 "1024 Gross National Product 17737 19930 23274 20314 27060 31232 33221 39937 45776 2891 3196 3636 3248 4073 4760 3482 6303 7439 19839 20942 23928 21376 29602 32388 38133 42734 48093 Gross External Debt Ratio 22.8 23.3 23.6 28.4 29.0 28.6 17.4 18.7 21.3 23.5 33.2 40.6 2.7 2.8 3.9 3.7 2.8 2.0 1.9 Met Extern.al Debt Ratio 19.4 17.8 23.7 24.1 22.7 22.8 15.0 17.4 19.5 22.6 50.3 34.6 0.9 0 .4 -13.1 -13.5 -10.6 -8.0 -2.5 Snourter Exports, Interest Payments end Receipts: Table 1; Amorciration, Reserve Moldings: International monetary Pond, International Financial Statistics, various issnes. CNP in torrent prices, World senk data base Cross External Debt: National Foreign Assessment Conter, Non-OPEC L0C-c External Debt Positionsa. Washrington, D.C.,* January 1980. For Indonesia and Nigeria. Public Debt only, World Bent date base. Mote; Grao.sseternal debt includes private as soil as public debt; net reseerves are defined as sum of foreign exthange holdings, gold roeseves as veined by natIonal authoxities, SDR boldings, sod renatee position sith tire International Monetary Fund, less use of Fund credit. Table 6 Domatictae sndltur. Sbares, Iocraennti.1 Capital-Output Ratio. a.0 Growth Rates 1983-73 1970-73 1973-76 1976-79 1973-79 1963-73 1970-73 1973-76 1976-79 1973-79 1963-73 1970-73 1973-76 1976-79 1973-79 3 T TA, o a o 0 C C 0 T U K I S I A Private Co0eumption 64.0 62.2 57.3 36.2 37.0 72.6 72.9 61.4 57.8 59.6 62.7 65.5 60.3 38.4 59.3 Pubtlc Coaumptioo 21.9 25.6 22.2 19.7 21.2 14.3 L2.4 13.1 t5.7 16.9 15.2 14.2 15.5 34.6 14.2 Total Cooawvtioo 83.9 87.7 79.7 73.9 78.2 86.9 82.3 76.A 76.6 76.5 78.9 19,? 73.8 73.1 73.5 Or... Dometic nigad 18vaftst8t v.a. 10.9 16.1 21.8 19.6 sa.. 12.7 20.2 22.6 21.4 na.. 19.6 24.8 27.0 25.9 inoteaaai io Stocks n.&. 1,3 2.1 2.4 2.2 h... 2.1 3.6 0.9 2,1 n.e. 0.6 1.3 -0.2 0.7 Cross Domtatie Inva*taso't 14.1 11.3 20.3 26.1 21.8 13.1 14.7 23.6 23.4 23.5 22.1 20.3 26.2 26.9 26.3 Incrental Csp$;al-Qu9oq RLatios 3.6 3.0 2.3 3.4 2.9 3.4 5.3 1.6 6.2 3.4 5.4 2.2 2.5 3.9 3.1 Oroet atoo (constant prices) di areas Ntionl Prr&-t 4.3 4.4 8.8 9.6 9.2 4.5 6.7 9.5 3.3 6.4 6.1 10.3 9.5 7.5 7.6 Population 2.4 2.0 2.2 2.6 2.4 2.6 2.7 2.9 3.2 2.1 2.0 1.7 2.1 2.3 2.3 Per Capita GNP 2.0 2.3 6.5 6.9 6.7 1.9 2.0 6.6 0.3 3.7 4.2 9.6 6.5 4.5 3.1 IR R TA 19 V A tl 14 H P % 1I LI P 1 I N I (in corran t M ,i Private Cooao.ption 65.6 61.3 61.4 57.9 39.6 67.1 66.4 65.7 63.0 64.4 70,6 69,9 62.9 63.1 63.0 Publia Couaumption 13.3 17.4 17.9 18.0 17.6 10.2 L0.8 10.3 10.9 10.6 8.7 6.9 9.2 9.2 9.2 Total Consumption 80. 78.7 18.6 75.9 77.2 77.3 71.2 75.9 73.9 74.9 79.3 78.8 72. 72.4 72.2 Gr"o. DoeVtia Fixed Invteetrt na.& 21.8 19.4 22.1 20.7 a. a. 21.4 21.7 24.3 23.1 n.a. 15.9 21.3 22.7 22.0 IOorafaas to Stocks n.a. -0.5 1.0 2.0 2.1 n..e. 1.4 2.4 1.6 2.0 n.a. 5.3 6.7 4.9 5.8 Gross Doasatic Inve.twet 19.3 21.3 21.4 24.1 22.8 25.7 22.6 24.1 26.1 25.1 20.7 21.1 28.0 27.6 21.8 Increusotal Capital-0ou;1t Ratios Il2.6 3.8 3.6 5.1 3.3 2.2 3.6 2.9 2.7 2.8 3.5 2.5 3.0 3.6 3.4 Ciosi 8AIS (constant pricas) d1 aiitI I.e Prod.Lc 6.3 3.3 5.6 8.3 8.2 7.7 6.6 6.9 8.0 7.8 3.0 6.4 3.9 3.9 5. Population 3.4 5.5 3.3 5.3 3.4 3.0 2.9 2.8 2.3 2.6 3.0 2.9 2.5 2.7 2.6 par Capita 06 3.0 2.0 3.2 3.0 2.8 4.6 3.6 4.1 5.6 3.1 2,0 3.3 3.4 3.2 3.3 J A H Ar I A l/ P 880 T AN IA I1 A Private Cooauatio 65.5 59.1 61.9 66.4 63.7 72.9 75.3 69.7 72.3 71.3 70.8 65.2 65.2 67.7 66.5 Public Consumption 12.0 13.0 17.3 20.3 16.3 10.5 12.2 11.6 12.9 12.3 11.6 13.2 13.4 14.3 14.9 Total ionueuptioo 77.5 71.1 79.2 66.6 82.2 65.4 85.5 81.3 93.3 83.4 82.2 78.3 80.7 61.9 61.3 Cross Domstic Fixed hnYSRsgnt n.a. 24.4 18.9 12.4 16.3 O. a. 1.6. 17.0 13.0 18.0 n.d. 20,3 17.3 16.6 17.0 lncresasa in stocks n.e. 3.5 1.9 1.0 1.5 n1.a. 0.1 1.5 -0.3 0.6 a. 1.2 2.3 1.5 1.7 08cm. flmoxtic Investment 22.5 27.9 20.6 15.4 17.8 16.6 14.3 18.3 14.7 16.6 17.8 21.3 19.3 19.1 18.7 Iocresentol CapItal-output lubea 51 4.0 3.7 3l.7 -9.I 8.7 2.1 3.3 3.9 -3.5 5.9 3.1 3.9 4.2 3.9 4.1 gr!L a (constant prices) d rs at onal Product 5.7 3.9 -4.8 -1.6 -3.3 4.9 3.6 3.6 -1.7 0.4 3.) 3.4 4.4 5,2 3.1 PoptuatIocm 1.8 1.8 1.7 1.8 1.7 2.8 2.Y 2.7 2.6 2.6 2.8 2.9 3.0 3. 3.0 Per Capita GNP 4.1 4.0 -6.4 -3.3 -5.0 2.1 2.8 0.9 -4.4 -2.4 2.9 2.3 1.5 2.2 2.1 1 80D0 6 5m I A I2V087 C0 A T N 20 8 R I A 6/ PrivAkte C8nauptbon 81.7 73.2 89.3 83.9 67.7 AA.6 61.4 59.7 54.6 37.7 73.3 71.8 63.9 39.7 61.8 Public Consumption 7.4 9.6 10.7 11.9 11.3 15.6 16.6 17.0 19.3 36.3 6.9 9.6 11.3 31.2 II1.7 Total Consumption 69.1 82.1 B0.1 77.6 79.0 60.2 78.3 76.7 70.0 74.1 62.4 81,6 75.2 70.9 73.4 Orces Doasatic F1ind 6VlowUnt 8.*. 17.3 19.9 22.1 21.0 n.a. 20.8 22.0 29.0 24.8 n.a. 18.6 24.8 29.1 26.6 tact"e,s. 0 io ctla D.8. 0.8. 9.8. n.6. n.a. v.a. 1.0 1.3 1.0 1.3 n.&. U.S. 1.a. It.S. 11.8. Cross Domsatia Inveacmeat 10.# 17.3 16.6 22.2 21.0 19.6 21.7 23.3 30.0 25.9 17.6 18.4 24.8 29.1 26.6 Incemenstal C#Pxtsaltpu; 151t09!' I.8 3.0 2.1 3.4 2.7 2.3 2.6 2.2 3.7 3.0 2.2 2.0 2.7 4.9 3.9 Or ta!e (constant prites) d aniiiE~ al Product6. 8. 62 62 6.2 6.5 6.6 5.8 6.0 7.3 5.7 6.2 7.0 5.2 6.3 Population 2.1 3.9 1.7 2.0 1.9 4.2 9.2 3.7 6.3 3.1 2.5 2.3 2.3 2.6 2.4 Per Capita GNP 4.3 6.3 4.4 4.1 4.2 2.3 0.6 0.1 3.6 2.3 3.3 3.9 4.5 2.8 3.9 Source: World bank data bank. Nolest O/ 1979 damta mr aailable o expendicue shra.,. b/ Rspenditur. hAres .celude dgat for thle first year of saab period, c/ Intremental eapital-outpt ration hao. bee. calculated by assuodog a one year lag between Investment anld ntpst; the ratio for 1970-73, for esmapl., has boom d6rived by divTdtu6 the gu. .i Sr... ducestic fIxed tn.vestment 1t. 1970. 1971. 1972 by the lSatenent in GNP batwaon 1970 and 1973, both esasurad in e66staot prices, 8/ Calculated by regrosaion excempt for Egypt, Jnmai.a, and Indonesia. - 24 - payments, the gross debt service ratio rose further to 27 percent, and the gross external debt ratio to 47 percent, in 1978. Increases were even larger in the net external debt ratio, from 13 percent in 1973 to 51 percent in 1978, as Jamaica had a negative reserve position in the latter year. Tanzania experienced a 13 percent average loss in market shares in its traditional exports as large declines in the exports of cotton and vegetable oil by-products were only partially compensated by increased market shares in coffee, tea, and sisal. Tanzania also had a loss of 47 percent in its market share in nontraditional primary exports and 64 percent in manufactured exports. Losses in market shares in agricultural exports in part reflected the poor performance of agriculture. Moreover, the increased overvaluation of the exchange rate and reduced reliance on price signals adversely affected primary as well as manufactured exports, the exception being the tree crops where the production period is 8 to 10 years. Inefficiencies of resource allocation further led to a one-third rise in incremental capital-output ratios as compared to the 1963-73 period. If Tanzania did not reach the state of virtual bankruptcy as Jamaica did, the explanation lies in the increasing inflow of foreign capital that reached 14 percent of GDP in 1978. As practically all of the inflow was on concessional terms, or in the form of outright grants, Tanzania's gross debt service ratio declined from 15 percent in 1973 to 7 percent in 1975-77, although it increased again to 16 percent in 1978. In turn, the ratio of gross external debt to GNP rose from 22 percent in 1973 to 28 percent in 1978, with a rise from 15 percent to 28 percent in the net external debt ratio as Tanzania used up its foreign exchange reserves. - 25 - The inflow of funds from abroad permitted maintaining GNP growth rates at 4 to 5 percent a year in Tanzania, notwithstanding the decline in domestic savings and the rise of incremental capital-output ratios. These figures however, reflect to a considerable extent the increased absorption of resources by the public sector, with public administration and defense growing by 9.2 percent a year between 1973 and 1979. Furthermore, the 6.1 percent reported growth rate for agriculture conflicts with data for the individual crops. At the same time, as in the case of Jamaica, Tanzania's foreign exchange difficulties largely explained the decline of import shares in GNP. As noted above, losses in export market shares until 1976 were followed by gains in 1978 in Peru. The largest gain occurred in copper exports as the stabilization of political conditions permitted the exploitation of Peru's favorable resource endowment. Increases were further shown in manufactured exports, due in part to exports to partner countries in the Andean group and in part to the depreciation of the real exchange rate. Increases were experienced also in petroleum and, to a lesser extent, in coffee, lead ore, and nontraditional primary exports (chiefly mining products) whereas a substantial decline occurred in the exports of iron ore, fish meal, sugar and cotton. While natural factors were predominant in the case of fish meal, the fall in the exports of cotton and sugar reflected the poor performance of Peruvian agriculture, with production rising at a lower rate than population. Various influences contributed to this result, including the poor management of the cooperatives created after the agrarian reform, the system of quotas imposed on the use of land for producing various crops, and the nationalization of the marketing of agricultural products. With the dislocation of production under General Velasco's reign leading to losses in export market shares and to negative import substitution, Peru - 26 - incurred substantial foreign debts. The gross external debt ratio rose from 36 percent in 1973 to 48 percent in 1976 and the gross debt service ratio from 47 percent -- itself representing a considerable increase over earlier years -- to 60 percent. Further increases in these ratios occurred in subsequent years as the government of General Bermudez, installed in 1975, continued with the expansionary policies of its predecessor for a time. The application of the May 1978 policy package, in turn, led to a decline in GNP but, with rising amortization and interest payments, the debt situation improved only after 1978. Indonesia, Nigeria, Ivory Coast As a result of the quadrupling of petroleum prices, Indonesia and Nigeria experienced favorable external shocks in 1974, the balance-of-payments effects of which equalled -15 percent and -22 percent of GNP in the two countries, respectively. Following some fluctuations associated with changes in the real price of petroleum, these effects regained approximately their 1974 level in 1978 in Indonesia but declined to -2 percent in Nigeria that experienced a rising trade deficit in terms of "1972- prices. Finally, in the Ivory Coast, the favorable balance-of-payments effects of external shocks equalled -3 percent of GNP in 1974 and -6 percent in 1978, with variations in the intervening years resulting from fluctuations in cocoa and coffee prices. Indonesia further experienced a 45 percent increase in its average export market share, with the growth of fuel exports accounting for one-half of the total. Starting from a small base, Indonesia-s market share in manufactured exports rose by three-quarters as increases in exports to its ASEAN partners more than offset losses in developed country markets. Indonesia's market shares in its traditional exports (other than fuels) increased by one-half, on the average, during the period under - 27 - consideration. Export shares more than doubled in the case of coffee and tin, rose by one-third for nonconiferous wood and by one-sixth for palm oil, remained unchanged for natural rubber, and fell by one-half in the case of crustaceans and mollusks. Indonesia also increased its market shares in nontraditional primary exports, with export growth experienced in a variety of products. Exports rose, notwithstanding the decline in the real exchange rate that continued until the 34 percent devaluation in November 1978. Favorable developments in exports may reflect the supply-enhancing effects of investments in the pre-1973 (coffee, tea) and the post-1973 (petroleum and nontraditional primary and manufactured activities) periods. At the same time, the import needs of increased investment activity, with the share of investment in aggregate expenditure rising from 11 percent in 1963-73 to 21 percent in 1973-78, contributed to negative import substitution that was further aggravated by the appreciation of the real exchange rate. A substantial proportion of new investment was oriented towards highly capital-intensive projects of often doubtful efficiency, undertaken or sponsored by the public sector. High-cost public investments, as well as the adverse effects of increased import, investment, and credit controls of the private sector, led to a rise in the incremental capital-output ratio from 1.8 in 1963-73 to 2.7 in 1973-78. As a result, increases in investment shares, financed largely from rising oil revenue, were not translated into higher rates of economic growth. In fact, a slight decline in GNP growth rates occurred after 1973, giving rise to some import savings. These savings in imports, together with increases in export market shares, exceeded the balance-of-payments impact of negative import substitution, thereby reinforcing the favorable effects of external shocks. - 28 - Correspondingly, additional net external financing became increasingly negative in Indonesia. This was nearly offset, however, by the rise in non- factor service payments that include the growing discrepancy in trade figures between trade and balance-of-payments statistics. While in "1972" the reported trade surplus was $0.3 billion larger in the trade statistics than in the balance-of-payments accounts, the difference reached $3.3 billion by 1978. To the extent that the discrepancy reflects unreported imports, negative import substitution and favorable trends in additional net external financing are overstated. Actual net external financing was $-1.8 billion in 1974 in Indonesia, declined to $-0.2 billion in 1975 and in 1976, increased again to $-1.6 billion in 1977, and fell to $-0.6 billion in 1978. The 1975-76 decline reflected substantial increases in imports for capital intensive projects, undertaken in large part by Pertamina, that was reversed in 1977 but imports rose again in 1978. Dividend payments to oil companies, representing a counterpart to petroleum exports, increased from $0.6 billion in 1973 to $1.3 billion in 1974 and to $1.9 billion in 1978. Adjusted for dividend payments, Indonesia had net external financing requirements of about $1.0 billion in 1975-76. This fell to practically zero at the time of relative austerity in 1977 but rose to $1.5 billion in 1978, motivating the November 1978 devaluation. In 1975-76, financing took the form of drawing down reserves and borrowing abroad. After a decline in 1977, foreign borrowing increased again in 1978, in part to finance amortization and interest on debt contracted earlier and in part to cover the balance-of-payments deficit. Nevertheless, with increasing exports and GNP, debt service and external debt ratios remained low. - 29 - Nigeria lost export market shares as a result of the increased overvaluation of the exchange rate and the strong pro-urban bias in the wake of the quadrupling of petroleum prices, which adversely affected agricultural production and exports. Agricultural output did not regain the 1970-71 level until 1979 and groundnut exports fell to zero. With Nigeria maintaining its export market share in cocoa and experiencing a decline to one-fifth in regard to tin, it had a one-third loss in its average market share in traditional primary exports. Losses were even larger in nontraditional primary exports (44 percent) while a decrease of 7 percent was shown for fuels. Finally, the overvaluation of the exchange rate and the increased absorption of domestically-produced goods by home markets adversely affected manufactured exports, with a 71 percent decline in market shares. The need for food imports, the import requirements of increased investment, and the overvaluation of the exchange rate led to rapid increases in Nigeria's imports. In 1978, non-fuel imports were more than double the imports estimated on the assumption of unchanged income elasticities of import demand. In the early part of the period, the acceleration of economic growth also raised import levels but this effect wore off by 1978. In fact, the rate of growth of GNP in the 1973-79 period only slightly exceeded that for 1963-73, although investment shares more than doubled. Apart from adverse developments in agriculture, this result is explained by emphasis on capital intensive investments in the public sector and by inefficiencies in the implementation of these investments. With the adverse balance-of-payments effects of the policies applied, additional net external financing turned positive at the end of the period under consideration as did the actual resource gap. Financial requirements were raised further by the dividends payable to the foreign oil companies. - 30 - Correspondingly, Nigeria was drawing down the reserves it earlier accumulated and, in 1978, it borrowed substantial amounts abroad. Nevertheless, gross debt service and gross external debt ratios remained negligible throughout the period. The Ivory Coast experienced a one-fifth increase of its average market share in traditional primary exports that were dominated by two tree crops, cocoa and coffee. It experienced a four-fifths rise in its market share in cocoa beans, three-fifths in cocoa butter, and no change in cocoa paste. Increases in market shares in coffee, cotton, and palm oil approximately equalled the average increase for all traditional exports. Finally, the rise in sawnwood exports matched the fall in the export of logs while a small decrease was shown for bananas. The large variety of traditional primary exports, defined as commodities that accounted for at least 1.5 percent of export value in "1972", indicates the success of the Ivory Coast in diversifying its primary sector during the sixties in the framework of a relatively open economy. The process of diversification continued further in the seventies, with increases in the exportation of processed fish and fruits leading to a doubling of the country's market share in nontraditional primary exports. Notwithstanding the possibilities offered by free entry into the European Common Market and by West African integration arrangements, the Ivory Coast was less successful in developing manufactured exports. Rather, with the decline in the real exchange rate, the market share of the Ivory Coast in these commodities fell by one-fifth. Decreases were experienced in both developed country and in developing country markets. The overvaluation of the exchange rate also contributed to negative import substitution that was aggravated by the import intensity of rising - 31 - investment. An increasing part of new investment was undertaken in the framework of public investment programs that often involved high-cost, capital-intensive investments. By 1976-79 the incremental capital-output ratio exceeded the 1963-73 average by one-half, fully matching the rise in investment shares. The rise of public investment, together with increases in current public expenditures, necessitated increased borrowing from abroad. Thus, notwith- standing the favorable balance-of-payments effects of external shocks, the ratio of the gross external debt to GNP rose from 17 percent in 1973 to 41 percent in 1978 in the Ivory Coast. Increases were smaller in debt service ratios, from 9 percent in 1973 to 13 percent in 1978, as much of the borrowing occurred towards the end of the period. Conclusions and Evaluation With export prices rising more rapidly than import prices, the three North African countries experienced improvements in their "pure" terms of trade but this was more than offset by the adverse effects of higher import prices on their trade deficit, expressed in "1972" prices. And while increased tourist receipts and workers remittances and, in the case of Egypt, toll revenue from the Suez Canal, more-or-less matched the adverse balance-of- payments effects of external shocks, all three countries relied on increased external financing as losses in export market shares (except for Tunisia that had a relatively open economy), negative import substitution, and the rise in GDP growth rates augmented their balance of payments deficit. The increased overvaluation of the exchange rate led to declines in export market shares in Egypt and Morocco while growing food imports and the high import content of increased investment contributed to negative import substitution in all three countries. Table 7 Representative Ratios of Balance of Payments Effects of External Shocks *nd Policy Responses to These Shocks (averages for the years 1974 to 1978) External Shocks Additional Increase Effects Gross Gross 8s a pertentage Tertm of Trade Export Volume Net External in Export lmport of Lower GNP External Debt Debt Service Growth Rate of CUP Incremental Capital Dnmestic Savings Rates of Effects Effects Finneing Market Share Substitution GrowtO Rate Ratio Ratio percent Output Ration percent GNP Average Trade as a percentage of External Shocks a percent 1973-79 1975-79 1973-79 1975-79 1°73-79 1975-79 Egypt 16.5 78.9 87 13 250 -19 -133 3 63.7 63.9 9.2 12.0 2.9 2.7 11.1 13.3 Morocco 6.1 43.9 78 22 210 -21 -60 -29 28.5 15.9 6.8 5.1 3.4 4.3 15.3 14.2 Tunisia 8.0 43.2 65 35 187 15 -84 -18 34.7 18.9 7.4 6.6 3.1 3.6 21.0 21.2 Kenya 8.1 50.5 80 20 45 -14 60 9 20.3 11.4 6.2 6.4 3.3 3.1 20.0 20.1 Thailand 4.9 36.1 90 10 11 43 43 4 9.5 21.1 7.6 8.1 2.8 2.6 24.1 23.4 Philippines 8.4 68.0 78 22 113 7 -15 -4 22.8 29.9 5.9 5.9 3.5 3.7 24.3 24.3 s Jamica 13.1 59.3 50 50 -14 -34 60 88 37.1 19.0 -3.3 -3.7 -6.7 -4.9 15.4 13.3 Peru 5.4 41.9 60 40 158 -18 -45 5 49.7 56.3 0.4 -1.4 5.9 -11.0 13.9 12.6 Tanzania 8.7 67.9 80 20 71 -48 68 8 28.9 9.9 5.1 5.6 4.1 3.6 11.6 11.7 Indonesia -13.2 -117.6 -113 13 -101 17 -20 4 27.3 7.1 6.2 6.4 2.7 3.4 22.0 22.2 Ivory Coast -4.7 -23.1 -174 74 -132 85 -55 2 29.2 11.3 7.3 8.3 3.0 2.9 27.2 28.7 Nigeria -12.1 -96.2 -117 17 -30 -5 -64 -1 2.7 0.6 6.3 6.3 3.8 3.8 27.9 26.0 Source: See Tables ,4A 5, 6. Note: aI The signs were reversed for Indonesia, Ivory Coast and Nigeria. - 32 - There are differences among the three countries, however, as far as the financing and the uses of new investment are concerned. Morocco relied to a considerable extent on foreign borrowing and undertook large investment projects of questionable efficiency that raised incremental capital-output ratios and led to a decline in the rate of economic growth. Incremental capital-output ratios rose to a lesser extent in Egypt and Tunisia, where high-cost capital intensive investments were much less prevalent, and these countries were also successful in improving their domestic savings effort. In contrast to the three North African countries, Thailand utilized domestic policy measures to offset the unfavorable balance-of-payments effects of external shocks. Operating in the framework of an open economy, Thailand increased its export market shares to a considerable extent and experienced relatively efficient import substitution, leading to a decline in incremental capital-output ratios. In turn, the inefficiencies associated with high protection led to increases in incremental capital-output ratios in the Philippines, where the balance-of-payments effects of domestic policies were practically nil. Correspondingly, notwithstanding its higher investment share, the rate of economic growth was lower in the Philippines than in Thailand. Increases in the rate of investment were financed in large part by foreign borrowing in the Philippines, while Thailand relied primarily on increases In domestic savings and hence little change occurred in its foreign debt position. Kenya also largely relied on domestic savings to finance the rise of investment activity. At the same time, Kenya maintained its relatively outward-oriented stance and eschewed large, high-cost investment projects. It was thus able to translate increased investments into higher rates of economic growth. - 33 - In Jamaica, Peru, and Tanzania, the adverse effects of external shocks were aggravated by internal shocks, entailing increased government intervention and considerable price distortions. In all three countries, the result was a substantial fall in domestic savings ratios and export shares and an increase in incremental capital-output ratios. These adverse developments led to an absolute decline of the gross national product in Jamaica; a fall in incomes was avoided through massive foreign aid to Tanzania; and increased external indebtedness occasioned the introduction of far-reaching reforms in Peru, with subsequent increases in exports and savings. Favorable external shocks, associated with increases in the prices of petroleum in Indonesia and Nigeria, and in cocoa and coffee prices in the Ivory Coast, gave rise to a rapid expansion of public investment in these countries. The import needs of higher investment, together with the effects of the appreciation of the real exchange rate, in turn, led to negative import substitution in all three countries. Export shares, however, rose in Indonesia and the Ivory Coast, reflecting gains in tree crops in both countries, increased petroleum exports in Indonesia, and export diversification in the relatively open economy of the Ivory Coast. In all three countries, and especially in Nigeria, public investments were concentrated in high-cost, capital-intensive activities. Incremental capital-output ratios rose as a result, increasingly offsetting the effects of higher investment shares on GNP growth. The Ivory Coast nevertheless experienced an acceleration of its rate of economic growth as, on the whole, it continued to follow a policy of outward orientation. The findings point to the importance of the policies applied in response to external shocks. Continued outward orientation in the Ivory Coast, Thailand, and Tunisia led to increases in export market shares. This - 34 - conclusion also applies to Kenya if trade with Tanzania and Uganda is excluded. By contrast, the largest losses in market shares were experienced in Jamaica and Tanzania (even excluding trade with Kenya and Uganda), where government interventions in the market mechanism in general, and protectionist measures in particular, were the most far-reaching. In turn, increases in export market shares had favorable effects on the rate of economic growth whereas reliance on import substitution had the opposite effect. These conclusions are supported by statistical evidence for the twelve countries under study. To begin with, the Spearman rank correlation coefficient between the extent of reliance on export promotion in response to external shocks, defined as the ratio of the increment in exports associated with increases in market shares to the balance of payments effects of external shocks, and the rate of growth of GNW was 0.48 during the 1973-79 period, statistically significant at the five percent level. The corresponding result is 0.64, statistically significant at the' one percent level, if growth rates are calculated for the 1975-79 period, in order to take account of lags in the 1/ adjustment . Furthermore, reliance on import substitution and the rate of economic growth are negatively correlated, with a rank correlation coefficient of -0.64 in the 1973-79 period, statistically significant at the one percent level. This result reflects the rising cost of import substitution in the confines of the narrow domestic markets of the developing countries as against the lowering of costs through the exploitation of comparative advantage and the 1/ External shocks, and ratios of policy responses to external shocks, shown En Table 7, are averages for the years 1974-78, calculated on a "1972" basis. Signs have been reversed in the case of countries with positive external shocks. The results are little affected if the increment in exports, associated with increases in market shares, is related to GNP. - 35 - use of large-scale production methods under an outward oriented strategy. There was no significant statistical relationship between reliance on additional external financing in response to external shocks and the rate of growth of GNP, the rank correlation coefficient being 0.20. This finding points to the importance of domestic policy measures that is also indicated by the lack of a statistically significant correlation between the balance-of- payments effects of external shocks, expressed as a proportion of GNP, and the rate of economic growth, the Spearman rank correlation coefficient between the two variables being -0.16. It further appears that, with the exception of Kenya and Thailand,l/ the balance-of-payments effects of domestic policies, in the form of export promotion, import substitution, and lowering the rate of growth of GNP, aggravated the effects of adverse external shocks and thus necessitated additional net external financing in excess of the balance-of-payments impact of these shocks. In turn, countries experiencing favorable external shocks supplemented increases in their foreign exchange receipts by foreign borrowing. The implications of investment allocation in countries that experienced a continuing (Indonesia, Ivory Coast, and Nigeria) or temporary (Morocco and Tunisia) increase in foreign exchange receipts, supplemented by foreign borrowing, are of further interest. Morocco, Indonesia, and Nigeria and, to a lesser extent, Tunisia and the Ivory Coast undertook high-cost capital intensive public investments that raised incremental capital-output ratios and adversely affected the rate of economic growth. Increased government 1/ Jamaica may also be considered an exception, although in this case the outcome was determined by the lack of availability of foreign loans. - 36 - intervention in economic life and reduced reliance on the price mechanism had similar effects in Jamaica, Peru and Tanzania, where domestic savings ratios and export shares also declined to a considerable extent. Finally, there is evidence that, unless compensated by export-promoting measures, the overvaluation of the exchange rate adversely affected exports in the countries under consideration while negative interest rates and increased budget deficits had unfavorable effects on the rate of savings. It would appear, then, that adjustment to external shocks was conditioned to a considerable extent by the domestic policies applied. Appendix Table I Balance of Payments Effects of External Shocks and of Policy Responses to These Shocks (1974-78 Averages) ($U.S. million) Egypt Morocco Tunisia Kenya Thailand Philippines Jamaica Peru Tanzania Indonesia Ivory Coast Nigeria I External Shocks Effects of Increased Import Prices 1915 1169 721 656 2004 2167 480 900 406 2293 669 3478 of which, Fuels 116 248 137 201 658 692 164 141 83 355 129 149 Non Fuels 1798 921 584 455 1346 1475 316 759 323 1938 539 3330 Effects of Increased Export Prices 830 805 542 463 1423 1225 357 648 236 6280 1008 7531 of which, Traditional Primary 312 584 102 221 768 624 284 422 147 1061 756 281 Fuels 238 13 285 128 6 21 12 54 13 4836 53 7125 Other Non-Traditional Primary 108 109 48 53 440 402 46 92 53 324 150 119 Manufactured 172 99 106 60 208 178 16 79 22 60 50 7 Difference (Terms of Trade Effects) 1085 364 179 193 581 942 122 252 171 -3987 -340 -4053 of which, Pure Terms of Trade Effects -271 -287 -245 -47 184 551 26 127 -19 -4216 -369 -5859 Unbalanced Trade Effects 1356 651 424 240 397 391 96 125 190 229 30 1807 Trend Value of Exports in "1972" prices 1151 860 426 456 1368 1777 568 1153 361 2724 823 3238 Hypothetical Exports in "1972" Prices 985 757 331 407 1305 1512 446 984 319 2255 678 2640 Difference (Export Volume Effects) 166 102 95 49 63 264 123 169 42 469 145 580 of which, Traditional Primary 44 66 53 13 7 214 111 147 18 159 127 13 Fuels 16 1 25 14 4 5 3 3 6 279 3 559 Other Non Traditional Primary 10 18 7 8 38 25 4 14 11 28 11 22 Manufactured 96 18 11 14 14 21 4 6 7 4 4 4 of which, Growth Effects 33 24 14 26 32 37 8 12 13 9 7 5 Income Elasticity Effects 63 -7 -4 -12 -18 -16 -4 -5 -6 -5 -3 -1 II Policy Responses Actual Resource Gap, in Current Prices 1031 386 202 169 747 947 72 585 310 -889 158 -699 Trend Value of Resource Gap, in "1972" Prices -2090 -594 -308 61 677 -412 108 -80 160 2437 415 330 Difference (Additional Net External Financing) 3121 980 511 108 70 1359 -35 665 151 -3326 -258 -1029 Actual Exports, in "1972- Prices 748 658 374 375 1579 1594 364 907 222 2841 843 2468 Hypothetical Exports, in "1972" Prices 985 757 331 407 1305 1512 446 984 319 2255 678 2640 Difference (Increase in Export Market Shares) -236 -100 42 -33 273 81 -82 -77 -98 586 165 -173 of which, Traditional Primary -193 -48 -5 34 114 -138 -72 -120 -5 109 110 -73 Fuels 7 1 -10 -14 -12 -12 -7 6 -19 371 4 -19 Other Non Traditional Primary 16 -41 -6 -11 102 199 16 -13 -39 86 49 -70 Manufactured -66 -12 63 -42 70 32 -19 50 -35 21 2 -11 Hypothetical Imports, in "1972" prices 757 1186 662 728 2266 1778 608 912 547 2446 738 2511 Actual Imports in "1972" Prices 2423 1466 892 583 1990 1955 462 1100 403 3142 845 4715 Difference (Import Substitution) -1666 -281 -230 145 276 -177 146 -188 143 -696 -107 -2204 of which, Fuels -8 13 -7 3 18 43 8 -1 39 -58 -6 -36 Non Fuels -1658 -294 -223 142 258 -220 138 -187 105 -637 101 -2167 Trend Value of Imports in "1972" Prices 789 1053 613 750 2290 1722 824 933 563 2363 742 2461 Hypothetical Imports in "1972" Prices 757 1186 662 728 2266 1778 608 912 547 2446 738 2511 Difference (Import Effects of Lower GNP) 32 -133 -4Q 22 25 -57 216 21 16 -82 5 50 of which, Fuels 1 -14 -1 2 2 -15 16 3 4 -3 1 -1 Non Fuels 31 -120 -48 21 23 -41 200 18 12 -80 4 -49 Source: International and National Statistics Appendix Table 2 Trade Effects of External Shocks and Policy Responses to These Shocks Commodity Groups (1974-78 Average Ratio) Egypt Morocco Tunisia Kenya Thailand Philippines Jamaica Peru Tanzania Indonesia Ivory Coast Nigeria Exports Traditional Primary Products Hypothetical/Trend 91.9 86.7 61.7 91.6 99.1 83.1 76.1 84.3 87.8 84.3 79.4 94.8 Actual/Hypothetical 61.0 88.9 94.7 124.6 116.1 86.9 79.7 84.8 95.9 112.8 122.6 69.1 Fuels Hypothetical/Trend 79.6 79.6 79.6 79.6 79.6 79.6 79.6 79.6 79.6 79.6 79.6 79.6 Actual/Hypothetical 110.9 139.1 89.6 73.3 14.4 35.4 35.4 160.4 18.0 134.2 130.1 99.1 Non-Traditional Primary Products Hypothetical/Trend 90.2 90.2 90.2 90.2 90.2 90.2 90.2 90.2 90.2 90.2 90.2 90.2 1 Actual/Hypothetical 116.4 75.5 89.4 85.3 128.8 186.8 142.3 89.7 60.2 133.1 147.8 66.5 0. 4anufactured Goods Hypothetical/Trend 77.6 89.9 89.4 90.7 94.2 91.1 90.7 90.7 90.7 94.5 95.1 85.3 Actual/Hypothetical 80.3 92.4 171.4 69.8 130.8 114.7 55.8 183.0 49.8 133.9 102.8 48.0 rotal Hypothetical/Trend 85.6 88.1 77.7 89.3 95.4 85.1 78.4 85.3 88.5 82.8 82.4 81.5 Actual/Hypothetical 76.0 86.8 112.7 92.0 120.9 103.4 81.6 92.2 69.4 126.0 124.4 93.5 Imports Fuels Hypothetical/Trend 96.2 117.4 103.1 97.8 99.3 106.3 105.7 94.7 94.8 106.9 98.5 108.2 Actual/Hypothetical 125.3 85.4 119.5 95.3 92.2 83.3 65.2 103.1 40.7 217.9 116.6 473.4 iqonFuels Hypothetical/Trend 95.9 112.3 108.3 97.0 98.9 102.8 104.6 98.0 97.5 103.5 99.4 102.0 Actual/Hypothetical 328.0 126.8 135.6 78.6 87.4 114.5 52.4 121.5 78.3 126.6 114.4 186.6 rotal Hypothetical/Trend 95.9 112.3 108.0 97.1 98.9 103.3 104.7 97.8 97.1 103.5 99.4 102.0 Actual/Hypothetical 320.0 123.7 134.7 80.1 87.8 109.9 53.6 120.6 73.8 128.4 114.5 187.8 No. TITLE OF PAPER AUTHOR 436 Exchange Rate Adjustments under Generalized R.M. Bautista Currency Floating: Comparative Analysis among Developing Countries 437 The Newly-Industrializing Developing Countries B. Balassa after the Oil Crisis 438 The Process of Industrial Development and B. Balassa Alternative Development Strategies 439 Monitoring Rural Development in East Asia G. Deboeck R. Ng 440 Higher Education in Developing Countries: G. Psacharopoulos A Cost-Benefit Analysis (consultant) 441 Policy Interventions for Technological C. Cooper (consultant) Innovation in Developing Countries 442 An Economic and Political Analysis of Alternative J. de Melo Trade Adjustment Policies in Three Archetype S. Robinson Developing Economies 443 A General Equilibrium Analysis of Foreign K. Dervis Exchange Shortages in a Developing Economy J. de Melo S. Robinson 444 Adoption of Agricultural Innovations in G. Feder Developing Countries: A Survey R. Just, D. Silberman (consultants) 445 Empirical Justification for Infant Industry L. Westphal Protection 446 The Political Economy of Specialised Farm J. Von Pischke Credit Institutions P. Heffernan, D. Adams (consultants) 447 Measuring Urban Malnutrition and Poverty: R. Mohan, M. Wagner A Case Study of Bogota and Cali, Colombia J. Garcia (consultant) 448 Aggregate Demand and Macroeconomic Imbalances in W. Grais Thailand: Simulations with the SIAMI Model RECENT PAPERS IN THIS SERIES No. TITLE OF PAPER AUTHOR 423 Rethinking Artisanal Fisheries Development: D. Emmerson (consultant) Western Concepts, Asian Experience 424 Transition toward More Rapid and Labor- B. de Vries Intensive Industrial Development: The Case of the Philippines 425 Britain's Pattern of Specialization in V. Cable Manufactured Goods with Developing Countries I. Rebelo and Trade Protection 426 Worker Adjustment to Liberalized Trade: Costs G. Glenday and Assistance Policies G. Jenkins J. Evans 427 On the Political Economy of Protection in H. Glismann Germany F. Weiss 428 Italian Commercial Policies in the 1970s E. Grilli 429 Effects of Non-Tariff Barriers to Trade on C. Hamilton Prices, Employment, and Imports: The Case of the Swedish Textile and Clothing Industry 430 Output and Employment Changes in a "Trade J. Mutti Sensitive" Sector: Adjustment in the U.S. M. Bale Footwear Industry 431 The Political Economy of Protection in Belgium P. Tharakan 432 European Community Protection Against Manufactured E. Verrydt Imports from Developing Countries: A Case Study J. Waelbroeck in the Political Economy of Protection 433 Agrarian Reforms in Developing Rural Economies A. Braverman Characterized by Interlinked Credit and Tenancy T.N. Srinivasan Markets (consultant) 434 How Segmented is the Bogota Labour Market? G. Fields (consultant) 435 Pirate Subdivisions and the Market for A. Carroll Residential Lots in Bogota Wodd Bank An Analysis of Developing NEW Country Adjustment PubUcaions Experiences in the 1970s: Low- Compounding and Discounting of Related Income Asia Tables for Project Analysis of Related Christine Wallich (with a Guide to Their Interest Staff Working Paper No. 487. 1981. 43 Applications) pages (including references). Second Edition, Revised and Stock No. WP 0487. $3. Expanded Adjustment Experience and Aspects of Development Bank J. Price Gittinger Growth Prospects of the Semi- Management Project planners and analysts will find Industrial Countries William Diamond and V. S. this book a convenient and time-sav- Frederick Jaspersen Raghavan ing reference for the preparation and Staff Working Paper No. 477. 1981. 132 Deals exclusively with the manage- decimal tables for I percent through 50 pages (including 3 appendixes). ment of development banks. 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Highlights Sherman Robinson questions especially relevant to devel- appropriate policies on current ex- Staff Working Paper No 443 1981 32 opment economists It also examines penditures, subsidies, user charges, pages (inciluding references). the mechanisms by which fiscal poli- public enterpnse pncing, self-financing Stock No. WP 0443 $3 cies may affect growth rates. of investment by public enterprises. Staff Working Paper No 605. 1983. 48 Includes three annexes that examine pages. direct taxes, indirect taxes, and tax Prices subject to change without notice ISBN 0-8213-0215-9 Stock No. WP 0605. changes in Pakistan's 1983/84 budget. and may vary by country. $3. NEW The Policy Experience of Private Bank Lending to Twelve Less Developed Developing Countries Municipal Accounting for Countries, 1973-1978 Richard O'Brien Developing Countries Bela Balassa Staff Working Paper No. 482. 1981. 60 David C. Jones Staff Working Paper No. 449. 1981. 36 pages (including appendix, bibliography). This manual is based on British prac- pages (including appendix). Stock No WP 0482 $3. tices and terminology of municipal ac- Stock No. WP 0449. S3. Private Capital Flows to counting, modified to suit the needs of other countries, especially those lack- The Political Structure of the Developing Countries and ing a core of appropriately trained ac- New Protectionism Their Determinations: countants. Provides the basic printh- Douglas R. Nelson Historical Perspective, Recent wpth little or nPo bookunting for those Staff Working Paper No. 471. 1981. 57 Experience, and Future ence and proceeds through successive pages (including references). Prospects levels of difficulty to some of the most Stock No WP 0471. S3. Alex Fleming advanced concepts currently in use, Staff Working Paper No. 484. 1981. 41 including the pooling of loans. An im- pages. portant feature is the multitude of NEW Stock No. WP 0484. S3 practical applications and examples of forms and records. Private Direct Foreign A joint publication of the Chartered Price Distortions and Growth Investment in Developing Institute of Public Finance and Ac- in Developing Countries Countries countancy and the World Bank. Ramgopal Agarwala K. Billerbeck and Y. Yasugi June 1984. About 900 pages. SLxteen informative tables trace the Staff Working Paper No 348. 1979, 101 ISBN 0-8213-0350-3. Stock No. BK 0350. distortion in prices of foreign exchange pages (including 2 annexes). $30. and other factors affecting the growth Stock No. WP 0348. $5. of developing countries. Based on sta- The Nature of Credit Markets tistics from thirty-one developing in Developing Countries: A countnes. NEW Framework for Policy Analysis Staff Working Paper No. 575. 1983. 78 Arvind Virmani pages. Savings Mobilization through Staff Working Paper No. 524. 1982. 204 ISBN 0-8213-0242-6. Stock No. WP 0575. Social Security: The Case of pages. $3. Chile, 1916-1977 ISBN 0-8213-0019-9. Stock No WP 0524. Christine Wallich S5. Pricing Policy for Development Describes the savings mobilization po- The Newly Industrializing Management tential in Chile and in five Asian pro- Developing Countries after the Gerald M. Meier grams. Sotne sort of social security OivloCrisis Cutisaerhe Presupposing no formal training in program functions in almost all devel- ela CBasis economics, it explains the essential oping countries. Programs are often Bela Balassa elements of a price system, the func- costly, whether measured in relation Staff Working Paper No. 437. 1980. 57 tions of prices, the various policies to GNP, govemment expenditure, pages (including appendix). that a govemment might pursue in govemment revenue, or the wage bill. Stock No. WP 0437. $3. cases of market failure, and the princi- This paper compares the successful ples of public pricing of goods and systems. Notes on the Analysis of services provided by government en- Staff Working Paper No. 553. 1983. 109 Capital Flows to Developing terprises. It also provides the would-be pages. Nations and the "Recycling" practitioner with an appreciation of the ISBN 0-8213-0123-3. Stock No. WP 0553. Problem underlying logical structure of cost- 5 benefit project appraisal. To give sub- Ralph C. Bryant stance to the applied and policy di- Short-Run Macro-Economic Staff Working Paper No. 476 1981. 67 mensions, many of the readings are Adjustment Policies in South pages. drawn from the experience of develop- Stock No. WP 0476. $3. ment practitioners and relate to such Korea: A Quantitative Analysis important sectors as agriculture, in- Sweder van Wijnbergen Notes on the Mechanics of dustry, power, urban services, foreign Staff Working Paper No. 510. 1981. 182 Growth and Debt trade, and employment. The principles pages (including 3 appendixes). Benjamin B. King outlined are therefore relevant to a ISBN 0-8213-0000-8. Stock No. WP 0510. host of development problems. $5c A practical model to explore the way . . d in which capital inflow from abroad af- The Johns Hopkins University Press. 1983. fects economic growth. 272 pages (including bibliography and in- dex). The Johns Hopkins University Press, 1968. LC 82-7716. ISBN 0-8018-2803-1, Stock 69 pages (including 4 annexes). No. IH 2803, $35 hardcover; ISBN 0- LC 68-8701 ISBN 0-8018-0338-1, Stock 8018-2804-X, Stock No. IH 2804, $12.95 Prices subject to change without notice No. IH 0338. $5 paperback. paperback. and may vary by country. State Finances in India A three-volume set of papers that ex- plores a range of issues relating to the nature of intergovemmental fiscal rela- tions in India. "4The pfnmary source for World Debt Tables Vol 1: Revenue Sharing in India medium- and long-term E.- DA ol D-ve4 C-..l Christine Wallich I Vol II: India-Studies in State Fi- external debt of many nances developing countries." Chnstine Wallich Vol III: The Measurement of Tax Ef- Suhas Ketkar, Asia-Pacific fort of State Govemments, 1973-1976 Economist and Vice President, Raja J. Chelliah and Narain Sinha Marine Midland Bank, N.A. Staff Working Paper No. 523 1982 vol I, 85 pages, vol. 11, 186 pages, vol. III, 85 pages. vNOften the only reliable ISBN 0-8213-0013-X vol. I, Stock No WP 1523, $3, vol. II, Stock No WP source of information for 2523, $5, vol III, Stock no WP 3523, $3. countries for which data is hard to come by ... Used quantitatively for macroeconomic detail as well as qualitatively in Structural Adjustment Policies reports discussing the debt picture. I find the in Developing Economies projected servicing payments a strong feature.99 Bela Balassa Bela Balassa ~~~~~~~~~~~~~~~~Jonathan Kayes, Intermational Staff Working Paper No. 464. 1981 36 Economist, Republic pages National Bank of Nk-w York Stock No. WP 0464. $3. Structural Aspects of Turkish World Debt Tables, 1983-84 Edition Inflation: 195041979 The World Bank's invaluable reference Also available for the first time M. Ataman Aksov guide to the external debt of develop- SumA Staff Working Paper No. 540. 1982. 118 ing countries. Essential planning tool Summary Report pages. for economists, bankers, country risk Debt and the Developing ISBN 0-8213-0098-9. Stock No. WP 0540, analysts, financial consultants and all World: Current Trends $5. those interested in the global system of trade and payments. Provides data and Prospects on the extemal debt of 103 developing Includes an overview and summary ta- Thailand: An Analysis of countries augmented by information, bles from the 1983-84 edition. Structural and Non-Structural where available, on major economic 1984. 64 pages. Adjustments aggregates plus indicators used to ana- Arne Drud, Wafik Grais, and lyze debt and creditworthiness. Shows Stock No. BK 0319, $6 50 Dusan Vujovic statistical tables by country, including Companion computerized data Staff Working Paper No. 513. 1982. 93 sbnding, commitments, disburse- base pages (including appendix). ments, service payments, and net bor- Includes all debt information given in ISBN 0-8213-0023-7. Stock No. WP 0513. rowings. Reports on pnvate the unabridged volume, and, where $3. nonguaranteed debt of 19 countries. available, offers continuous histoncal Gives aggregate position of 13 major series for 1970-82 and projected debt- borrowers-countries with disbursed service payments for 1983-92. Write for Trends in Rural Savings and and outstanding medium- and long- sample purchase agreement. Private Capital Formation in term total debt in excess of $13.5 bil- (9-track, phase-encoded, recording India lion at the end of 1982. Includes peri- density 1600 bpi) Raj Krishna and G.S. odic supplements as fresh data are re- Stock No. IB 0500, $5,000 (service bur- Raychaudhuri eaus for reselling to their clients), Stock World Bank Staff Working Paper No. 382. 1984. 328 pages. No IB 0667, $2,000 (banks and commer- 1980. 43 pages (including 2 tables, 3 ap- Stock No. BK 0315 $75 (annual subscrip- cial corporations); Stock No. IB 0666, $500 pendixes, references). tion) (universities and libraries). Stock No. WP 0382. $3. ___ The World Bank Publications Order Form SEND TO: YOUR LOCAL DISTRIBUTOR OR TO WORLD BANK PUBLICATIONS (See the other side of thu form P.O. BOX 37525 WASHINGTON, D.C. 20013 U.S.A. Date Name Ship to: (Enter if different from purchaser) Title Name Firm Title Address Firm City State_ Postal Code Address Country . Telephone ( ) City State - Postal Code Purchaser Reference No. Country e'Ilephone Check your method of payment. 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