The Clouds Clear over Poor-Country Debt
There seems a good chance that the managing director of the Internalional Monetary Fund will realize his hopes of raising $15 billion or so from surplus countries to lend to deficit ones.
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The Witteveen proposals are:
1. Half the money should come from the Opec surplus
countries, and the rest from the industrialized surplus coun
tries and the United States.
2. Commercial interest rates would be paid, perhaps
higher than the 7% on the now-ended oil facility.
3. Loans would be for longer than the three-to-five years
of normal IMF credits and even longer than the three-to-
seven years of the oil facility.
4. Loans would be related to the needs of the borrowing
country rather than the size of its entitlements under IMP
quotas.
5. Conditions will be attached — in some cases more se
vere than under the IMF's regulations, in some cases less
so, the key phrase being a country-by-country approach.
The reasoning behind the new fund starts with the IMF's own need for cash. Its usable, convertible currencies, now* down to about $4 billion, are only enough to meet the expected demand on them in the next six months or so. A boost will come from the round of quota increases now awaiting ratification by the parliaments of member countries, but the failure of IMF resources to keep pace with world trade is one reason developing countries have resorted to commercial bank debt.
The problem of third-world lending as a whole has been dramatised. The aggregate current account deficit of the non-oil developing countries last year was covered by aid, direct investment, short-term credit from the IMF and long-term borrowings from official bodies like the World Bank. All the net borrowing by developing countries from the Euromarkets went into their reserves.
However, a) a severe bunching of maturities is building up over the next four years and b) there are some countries whose economic management is so bad that the Federal Re-
serve Fund is right to be worried. That is why they would like the IMF to have a more powerful voice in international lending. Any country will be given a limit to its international loans and the American commercial banks, will be prevented from lending unwisely to any country by over-competing among themselves.
The IMF will not be lending only, or even primarily, to developing countries. Most of them, expecially the Asian ones, have adjusted to the rise in oil prices much better than expected (and much better than, for example, Britain and Italy). But the less advanced industrial countries, like Portugal and Spain, will also^ need balance-of-payments aid while they get their economies organised.
The IMF is sticking to the view that the new arrangement will not take it across the dividing line that segregates balance-of-payments adjustment finance from development finance. It is just that the adjustment process is going to take longer than was first supposed when the Opec countries quadrupled oil prices. Although Germany, Japan and Switzerland may be persuaded to reduce their surpluses, some of the Middle East oil states cannot do so for several years to come.
It will continue to be safe for commercial banks to continue to lend to middle income-countries, provided these countries can export.
The low-income developing countries are too poor to borrow from the banks and need aid, pure and simple. The new economic team in the American administration grasps the inter-connectedness of recycling, trade protectionism and aid. Its battle will be to spread this message at home, against strongly growing protectionist pressures, as well as abroad.
Adapted from "The Economist".
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I
Choose the word or phrase in brackets that would best sub stitute/or the word or phrase in bold print in the following sentences:
1. There seems a good chancethat the managing director of
the IMF will realizehis hopes of raising $15 billion or so. (probability, occasion, event) (fail, carry out, complete) (paying, receiving, accumulating)
2. Conditions will be attached, ....the key phrase being a
country-by-countryapproach.
(communicated, imposed, set) (individual, collective, unique)
3. The failure of IMF resources to keep pace withworld
trade is one reason developing countries have resortedto
commercial bank debt.
(promote, develop, meet the requirements of) (turned to, applied for, incurred)
4. The problem of third-world lending as a whole has been
over-dramatised.
(unnoticed, underestimated, exaggerated)
5. A sever bunchingof maturities is building up over the
next four years.
(expiring, converging, recycling)
6. The less advanced industrial countries will also need bal-
ance-of-payments aid.
(funds to pay off credits, funds to cover the balance of payments deficit, funds for new investments)
7. The new arrangement will not take it across the dividing
line thai segregates balance-of-paymenls adjustment fi
nance from development finance.
(level the difference, abolish the difference, different) ate)
8. The new economies team in the American administration grasps the inter-connectednessof recycling, trade protectionism and aid. (expresses, associates, understands) (interference, correlation, interdependence)
II
Choose the right answer:
1. The International Monetary Fund was established:
a) to encourage international cooperation in the monetary
field and to facilitate a multilateral payments system,
b) to secure favourable trading terms for the third world
countries.
2. Commercial banks are:
a) government owned banks receiving deposits and mak
ing loans,
b) privately owned banks receiving deposits and making
loans. ]
3. If a sum of money is lent for a specified period of time, the
amount which is repaid by the borrower to the lender
will be:
a) greater than the amount which was initially lent,
b) smaller than the amount which was initially lent.
4. We define the rale of interest to be:
a) the difference between what is lenl and what must be
repaid expressed as a proportion of the amount lenl,
b) the sum of what is lenl and what must be repaid ex
pressed as a proportion of the amount lent.
5. The balance of payments deficit indicates that:
a) the counlry's total paymenls obligalions exceed ils
total receipts, -\^
b) the counlry's total paymenls obligations are balanced by Hie lolal receipts.
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6. Trade protectionism policy is adopted by some countries in order to:
a) discriminate against less developed countries,
b) reduce the overall level of imports.
6. Mr A. Burns from the Federal Reserve and private bank
ers worry because ......
7. The Asian developing countries have adjusted to ....
8. It will be safer for commercial banks to...
9. The American administration is fully aware of__
Ill
Say what is true and what is false. Correct the false sentences:
1. There are no prospects for raising $15 billion from sur
plus countries to lend to deficit ones.
2. Normal IMF credits extend over the period of three to
five years.
3. New loans will be related to countries entitlements un
der IMF quotas.
4. IMF convertible currencies amounted to $4 billion and
were not sufficient to meet the expected demand on them
in the next half-a-year period.
5. Private bankers are worried if the developing countries
will be able to repay their debts at maturity.
6. The less advanced industrial countries have adjusted to
the rise in oil prices much better than the Asian ones.
7. The Middle East oil countries will have no difficulties in
reducing their surpluses.
8. The low-income developing countries need aid, pure and
simple.
IV
Complete the following sentences on the basis of the information given in the text:
1. $15 billion to be raised are to come from...
2. Commercial interest rates would be......
3. Loans would be related to......
4. IMF resources have failed to.....
5. The current account deficit of the non-oil developing coun-
tries was covered by......
Answer the following questions:
1. What does the managing director of the IMF intend to do?
2. Where should the money to be raised come from?
3. What interest rates would be paid on loans?
4. How long would loans be granted for?
5. What factors would be considered when granting loans?
6. When granting loans, what approach would be adopted?
7. What reasons does the IMF have for raising additional
funds?
8. Why does the writer of the article think that the problem
of third-world lending has been overdramatizcd?
9. Why will some developing countries find it difficult to re
pay their loans at niaturity?
10. What do the private bankers and the President of the
Federal Reserve insist on and why?
11. Which countries will need IMF aid most?
12. What will the new IMF fund facilitate?
13. Which countries is it safer to lend money to and why?
14. What is financial aid strongly linked with?
VI
Match the expressions listed in column A with the synonymous ones from column B.
В
| a) external debts b) settlement of a debt c) sum due |
1. to gran I aid
2. financial aid
3. foreign debts
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4. overdue debt
5. amount of a debt
6. paying off a debt
7. to be clear of debts
8. to contract debts
9. protectionism
d) to incur debts
e) to render assistance
f) debt standing over
g) protectionist policy
h) financial backing
i) to be out of debts
6. to adjust to the rise in oil prices
7. to stick to the view
8. to grasp the inter-connectedness of
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Free wriung. Evaluate the. importance of international financial aid to less developed countries.
VII
For each of the following phrases, find the expression in the text which it explains.
1. countries which have excess in receipts over expenditures
2. countries which expenditures exceed receipts
3. a certain sum of money lent on condition that it is returned
with or without interest
4. money in the form of coins or paper, ready money
5. paper money able to be exchanged at a fixed price usually
into US dollars
6. an accumulation of money, especially one set aside for a
certain purpose
7. money owed to a commercial bank
8. help, assistance
9. the system of helping home producers to face foreign com
petition by putting tariffs on imported goods
10. a series of recurring economic phenomena
VIII
Demonstrate the meaning of each of the, following expressions in sentences of your own:
1. to raise $15 billion fund
2. to pay interest rates
3. to meet the expected demand
4. to await ratification
5. to keep pace with world trade
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Unit Sixteen
Investment Risk:
The New Dimension of Policy
recovery
replacement cost skewed
structural steel uncertainty
подъем экономической
активности
стоимость замещения
уклоняющийся
структурированная сталь
неопределенность
Active Vocabulary:
business cycle capital projects
commitment —
discount (v) —
discount rate —
dispersion of profits —
elusive —
engender (v) —
failure of confidence —
growth —
illusive —
lag (V)
low of the cycle —
mushroom (v) —
output •—
price earnings ratio —
private investment —
proxy —
rate of advance —
rate of inflation —
rate of return —
деловой цикл
вложение капитала, финансовые
ассигнования
обязательство
дисконтировать, учитывать
учетная ставка
рассредоточение прибылей
неуловимый, уклончивый
N
порождать, вызывать
кризис доверия
рост
обманчивый, иллюзорный
отставать, запаздывать
нижняя фаза цикла
быстро расти, распространяться
выпуск продукции, объем
производства
отношение рыночной цены акции
компании к ее чистой прибыли
частные инвестиции
лицо, которому доверено
голосовать от имени акционеров
ставка по кредитам
уровень инфляции
норма прибыли
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