Problem

Uncertainty of development programmes due to short-term loans

Nature:
The lack of symmetry between the long-term requirements of development and the short- to medium-term nature of commercial bank external financing places clear obstacles in the way of broad-based socio-economic development. Policy makers can confront the problem in a variety of ways, but in order to illustrate the gravity of the matter for a country that is heavily indebted to commercial banks, policy options can be simplified and reduced basically to two: (a) to focus development strategies on activities with high short-term private commercial rates of return and wait for social development to 'trickle down' to the population; or (b) to seek balanced socio-economic development today and hope that banks will refinance their short maturities.
Problem Type:
F: Fuzzy exceptional problems
Subject(s):
Credit
Development
Date of last update
01.01.2000 – 00:00 CET