Archived Series > World Economic and Financial Surveys
Abstract
This paper assesses the issues of government involvement in international trade finance stemming from the recent changes in global financial markets. This study is based on discussions with representatives of export credit agencies during the period from October 2003 to May 2004. A survey of 27 agencies provided valuable insights. Financial flows facilitated by official export credit agencies are large in comparison with official development assistance and gross lending by international financial institutions to developing countries. However, the importance of officially supported trade finance has been declining relative to the rapid expansion of world trade and total capital flows to developing countries. The study highlights the key challenges facing official export credit agencies, including complementing the private sector, facilitating financing to low-income countries while helping maintain these countries’ debt sustainability, and playing a positive role in the area of trade finance in international efforts to address emerging market financial crises.
Abstract
The year 2005 marks an important juncture for development as the international community takes stock of implementation of the Millennium Declaration—signed by 189 countries in 2000—and discusses how progress toward the Millennium Development Goals (MDGs) can be accelerated. The MDGs set clear targets for reducing poverty and other human deprivations and for promoting sustainable development. What progress has been made toward these goals, and what should be done to accelerate it? What are the responsibilities of developing countries, developed countries, and international financial institutions? Global Monitoring Report 2005 addresses these questions. This report, the second in an annual series assessing progress on the MDGs and related development outcomes, has a special focus on Sub-Saharan Africa—the region that is farthest from the development goals and faces the toughest challenges in accelerating progress. The report finds that without rapid action to accelerate progress, the MDGs will be seriously jeopardized—especially in Sub-Saharan Africa, which is falling short on all the goals. It calls on the international community to seize the opportunities presented by the increased global attention to development to build momentum for the MDGs. The report presents in-depth analysis of the agenda and priorities for action. It discusses improvements in policies and governance that developing countries need to make to achieve stronger economic growth and scale up human development and relevant key services. It examines actions that developed countries need to take to provide more and better development aid and to reform their trade policies to improve market access for developing country exports. And it evaluates how international financial institutions can strengthen and sharpen their support for this agenda. Global Monitoring Report 2005 is essential reading for development practitioners and those interested in international affairs.
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This interim update of the IMF's latest regular reports on the World Economic Outlook (published in October 1998) and International Capital Markets (September 1998) provides a preliminary assessment of the unusual turbulence in international financial markets during much of the period August-November 1998, and its implications for the global economic outlook and for policy. The survey of prospects and policies is the product of a comprehensive interdepartmental review of world economic developments, which draws primarily on information the IMF gathers through its consultations with member countries. For its eveluation of developments in financial markets, the report also draws, in part, on informal discussions with commercial and investment banks, securities firms, stock and futures exchanges, and regulatory and monetary authorities.
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This study asseses trade liberalization in programs supported by the IMF by reviewing multiyear arrangements in the 1990s and six detailed case studies. It also discusses the main economic factors affecting trade policy targets.
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This study discusses the importance of export credits, their recent growth, and the trend toward more extensive reliance by official bilateral creditors on export credits as an instrument of financial support, and raises a number of issues regarding the role and limitations of export credit financing, espeically for economies in transition.
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This study reviews major issues and developments in trade and their implications for the work of the IMF. Volume I, The Uruguay Round and Beyond: Principal Issues, gives an overview of the issues and developments in the world trading system. Volume II, The Uruguay Round and Beyond: Background Papers, presents detailed background papers on selected trade and trade-related issues. This study updates previous studies published under the title Issues and Development in International Trade Policy.
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This paper focuses on the private nonfinancial sectors of the affected economies, financial liberalization provided households and businesses with greater access to credit markets. This contributed to the long period of expansion during the 1980s. Partly as a result of major changes to the financial systems, several industrial countries had a boom in asset markets associated with a period of asset accumulation, an unprecedented buildup of debt, a sharp increase in relative asset prices, and related increases in household wealth. The expansion in household financial activity in the United Kingdom during the 1980s was paralleled by a sizable boom in investment spending and an increase in corporate debt. The structure of balance sheets was also affected by mergers and acquisitions that led to a further expansion in corporate debt. New types of bank loans and accounts have prevented even greater disintermediation but have also reduced net interest margins because more deposits now earn market-related rates of return.
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This paper describes that in developing countries, the moves toward more flexible exchange rate arrangements and liberalization of exchange controls often occurred in the context of comprehensive macroeconomic adjustment programs supported by the IMF. These programs featured a broad range of policy actions, including an increasing emphasis on structural reforms aimed at improving resource allocation and enhancing the supply response of the economy. With respect to restrictive systems, the trend toward liberalization of nontrade current and capital transactions continues, primarily because it is seen as ineffective, even counterproductive, to try to control such financial flows. This trend contrasts with trade where it appears that some major participants have been awaiting the outcome of the Uruguay Round before further reducing restrictions. A single currency peg has been the exchange arrangement most frequently used by developing countries, of which over one third currently have such an arrangement. This type of peg has the merit of being easy to administer and is generally chosen by countries that have a large share of foreign exchange transactions in the currency chosen as the peg.
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This paper reviews major issues and developments in the trade area and outlines the challenges governments face as they seek to liberalize trade in the Uruguay Round of trade negotiations and address new trade issues. In industrial countries, the reorientation of policies was most apparent in steps taken to liberalize financial markets and foreign direct investment, privatize public enterprises, and deregulate services, particularly in the transportation and communication sectors. Among developing countries, a growing number recognized the merits of outward, market-oriented policies and took steps to liberalize their trade regimes and open their economies to international competition. By and large, the increased focus on market principles in industrial countries did not carry over to trade and industrial policies or, most notable, to the agricultural sector. Despite strong growth performance in 1983–1989, little progress was made in rolling back the protective barriers that had risen during the preceding recessionary period; protection persists in agriculture and declining sectors and has spread to newer high-tech areas.
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This paper presents report on a number of countries in Asia that have made substantial use of agency credits, including the quasi-concessional financing available through mixed credit s. Through their willingness to grant comprehensive relief on a case-by-case basis, official creditors have responded flexibly to the needs of individual countries. The ability of export credit agencies to also provide substantial new financing to rescheduling countries has depended on the strategy of debt subordination achieved through fixing cutoff dates. As to the role of export credits at present, when the debt strategy’s continuing emphasis on new money flows is being supplemented by debt reduction, the debt subordination strategy followed by export credit agencies has left them well positioned to provide necessary new financing for middle-income countries pursuing strong adjustment. In heavily indebted low income countries, whose needs for project finance should most appropriately be met by concessional finance, export credit agencies continue to play an important role in supporting essential short-term credits.