ResearchBPEA | 1977 No. 2
A Perspective on the Debt of Developing Countries
1977, No. 2
SINCE 1973, when the price of oil was raised very sharply, developing countries have incurred heavy debts. This paper looks at their ability to carry debt, first by examining the balance of payments and external borrowing of all developing countries that are not oil producers in general. It then focuses on a group of ten advanced developing countries that account for the bulk of the borrowing from private sources that has given rise to widely expressed concern. The analysis that follows leads to an optimistic conclusion about the capacity of the ten countries not only to carry their present debt but to expand it. It does not follow that decisionmakers in private financial markets will come to the same conclusion. Thus attention is given also to supplementing private lending with resources supplied by the International Monetary Fund. Furthermore, questions are raised about what could go wrong-what international developments could make the outlook less rosy for the heavy debtors.