Problem

Excessive dependence on export credits

Other Names:
Export debt-credit crisis
Nature:

While commercial credits play an important and useful role in world trade, excessive reliance on these credits may lead to debt-service crises.

Incidence:

[Developing countries] There are many instances in which developing countries have accepted suppliers' credits which were characterized not only by very short maturities and high nominal interest charges but also by substantial over-pricing of the goods supplied, so that extremely high effective interest charges were in fact incurred. It has been suggested, on the one hand, that developing countries ought not to accept suppliers' credits on such terms (notwithstanding the heavy pressures to do so where official aid is not forthcoming in sufficient quantity); and on the other hand, that the developed countries cannot legitimately escape responsibility for preventing the worst excesses involved in the system of commercial credits, especially since the primary object of such credits is not to aid developing countries but to encourage the marketing of exports.

Problem Type:
D: Detailed problems
Date of last update
07.11.2017 – 16:31 CET