Foreign exchange reserve shortages
Other Names: Foreign currency shortage
Hard currency shortage in developing countries
Nature: Availability of foreign exchange is crucial in development planning since all developing countries are forced to purchase imported equipment, spare parts and critical materials without which their own resources cannot be pressed into service. The developing countries face problems both in increasing their earnings of foreign exchange and in the increasing claims on available foreign exchange of rising debt payments and other essential commitments.
Incidence: The balance-of-payments difficulties encountered by many countries have had repercussions on the various reserve funds established by developing countries to provide credit for financing foreign trade. In several cases, the member country or countries which had previously been able to make a significant contribution to financing the fund have themselves encountered debt problems and have been compelled to severely reduce their contribution. In particular, those funds which have endeavoured to increase their capital have failed to find contributors to cover the planned increase. As from 1983, the developing countries' debt has induced banks to alter their view of the solvency of a number of these funds, so that they no longer have access to this source of financing.
Problem Type: D: Detailed problems
Date of last update 12.02.1997 – 00:00 CET