The Balance of Payments, International Monetary Assistance and Development

Abstract

We have seen how the composition of the trade of developing countries can lead to severe balance-of-payments difficulties, which can act as a constraint on growth, and how vulnerable many developing countries are to exogenous shocks which affect adversely both their export earnings and import payments. In this chapter we shall define formally the concept of a balance-of-payments constrained growth rate and examine its determinants. We shall then go on to consider the measures that countries themselves may take to raise the balance-of-payments constrained growth rate, and the assistance provided by international institutions to ease the constraint. The latter involves mainly a consideration of the role of the International Monetary Fund in assisting developing countries, and the mechanisms for recycling the balance-of-payments surpluses of oil-producing countries.