Third World's debt balance swings back

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A THREE-YEAR improvement in the financial balance between the Third World and industrial nations was reversed last year, according to World Bank figures published this morning.

The net transfer to developing countries in 1991 was dollars 13.2bn ( pounds 7bn), compared with dollars 16bn in 1990, when there appeared to be the beginning of a restoration of large-scale flows of money.

The World Bank blamed the deterioration in the flows last year partly on the improving situation in Latin America, where some countries with debt problems could afford to pay interest again in 1991. The region's interest payments rose dollars 3.7bn over 1990.

From 1984 to 1988 industrial countries took back more in interest, dividends and capital repayments than they lent or invested in the Third World despite the severe crisis in many countries.

But in the following three years the balance gradually improved in favour of the developing world, turning positive in 1989 for the first time since 1983.

Last year official development lending at dollars 50.7bn continued to dwarf private financing, which however rose from dollars 7.1bn to dollars 12.2bn. Direct foreign investment in developing countries fell back dollars 1.1bn to dollars 24.1bn.

The World Bank's own problem of bad debts owed by debtor countries eased during the year, with the provision against loan losses more than halved in 1992 to dollars 353m from dollars 775m.

The biggest backlog of payments is dollars 923m from Peru, but others behind on their debts are Congo, Guatemala, Iraq, Liberia and Syria. Panama, Nicaragua and Sierra Leone paid off their arrears during the year.

The report said new lending commitments in the year to next June would be between dollars 25.5bn and dollars 28.5bn, compared with dollars 21.7bn in the year just ended.

Oxfam yesterday called for a debt moratorium on the drought- hit countries of southern Africa, including relief of debt owed to the World Bank and the IMF.

It said more resources should be given to social funds within structural adjustment programmes, which should also be better designed to encourage food security.