But the international development agency said it was premature to talk about an end to the debt crisis for the entire Third World.
The latest rush of investment into Latin America was 'generally more volatile' and the region should beware of relying too heavily on external finance for its long-term development. Perhaps mindful of the 1980s Latin debt crisis, the World Bank warned: 'External finance can play an important beneficial role, but only when it supplements and supports sound development policy. Tolerance of poor policies is sharply reduced.'
The World Bank's latest Debt Tables pointed out that the transfer of resources from rich to poor had continued on a rising trend. This contrasts sharply with the late 1980s. In 1988, poorer nations remitted dollars 2.9bn more to rich countries than they received, with the pressures of the debt crisis still in full swing.
Partly reflecting the new investment boom in Latin America and a continuing stream of investment in East Asia and the Pacific, the net transfer of long- term resources jumped from dollars 8.1bn in 1989 to dollars 37.7bn in 1991. This year, the bank estimated, the transfer would total dollars 56.5bn.
Other indicators back up the view that the worst of the debt crisis may be over. Improved economic conditions and trade performance have held the total ratio of debt to national output at an average 37 per cent. The crucial debt to exports ratio has stabilised at 178 per cent.
The bank said that for the commercial banks and the middle-income countries that borrowed from them, the debt crisis was largely over. The crisis no longer threatened the stability of the international banking system and some of the Latin debtor nations were able voluntarily to raise debt or equity on international capital markets.
But the overall stock of debt owed by the Third World has grown sharply to dollars 1,703bn in 1992 from dollars 1,608bn, and the bank was concerned that, despite widespread acceptance of debt reduction schemes, they may not go far enough. Net new debt flows and the revaluation of non-dollar- denominated debt also helped to raise the overall stock of debt.
The debt burdens of many low and lower-income developing countries, especially in sub- Saharan Africa, remained 'unsustainably high', the bank said. It suggested that existing debt reduction schemes, such as the Trinidad Terms negotiated by Britain, were now inadequate. Equally important, low-interest loans for the future development of these countries might need to be stepped up.
Writing before the recent setback for reform in Russia, the bank called for adequate funding for the economic reforms in the former Soviet Union.
Some dollars 7bn of debt relief on the dollars 67bn foreign debt owed by the former Soviet Union was granted this year. But in 1993-95, some 52 per cent of the entire stock of debt falls due. Russian negotiators meet the Paris Club of Western creditor nations late this week to try to finalise a long- term debt rescheduling agreement. However, the latest developments in Moscow make an agreement less likely.
In addition to the debt relief, figures from Russia's Vneshekonombank show that Western creditor nations disbursed some dollars 8.5bn in the first six months of 1992. At the end of that period, some dollars 5.6bn more was promised.
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