Financing of the external payments deficit, Macroeconomics

Assignment Help:

Financing of the external payments deficit:

The trend  in India's widening CAD during the second half of  the eighties, both in absolute terms and also as a proportion of the GDP, increased the need for securing  an adequate flow of external finances. This was crucial to prevent the country from being forced to accept further cuts in the flow of imports from abroad. The situation  needs to be viewed in terms ofthe  prevailing state of  the country's external indebtedness and the potential of her future borrowings by the end of the eighties. The table below presents the scenario obtained in this regard.  

External finance could in principle be  availed of from multilateral official sources brimarily IMF), external commercial borrowings including supplier credit, NRI deposits on a short-term basis and, finally, by preventing herself  from further depletions,  from the  country's foreign exchange reserves. Of these, the net flows of finance from the IMF had already become negative'  by  1985-86. The other sources of external finance (including both corporate borrowings and NRIs  at  commercial  terms), began  to acquire significance only by the early nineties.

Notwithstanding the steady rise in gross authorisations of ECBs since the beginning of the eighties, net disbursements was slow to  follow during the period  1985-86 to  1988-89. In  the meantime, debt servicing on ECBs moved  up  steadily, and the  authorised ECB credit maintained an upward trend over the period. In sum therefore, the situation  by the  end  of  1980s was one in which the debt charges  (interest  and arnartisations) increased at a faster rate than gross disbursements of external loans.  

 


Related Discussions:- Financing of the external payments deficit

Determine exogenous enhance in the velocity of money, Assume in country-A C...

Assume in country-A Central Bank cares only about keeping the price level stable & in country-B, its central bank cares only about keeping output & employment at their natural rate

What is social cost benefit analysis, It refers to the study of feasibility...

It refers to the study of feasibility of a project in terms of its total economic cost and total economic advantages. It means to compare total cost with total advantage if we

Archery instructors need a license, Now suppose that the archery instructor...

Now suppose that the archery instructors need a license in order to charge for archery lessons. The license is free of charge, but there are only four licenses distributed. Assumin

Overnight target rates and inflation, Overnight target rates and inflation ...

Overnight target rates and inflation One of the major targets of every central bank is a low and stable inflation. Its main control variable is the overnight interest rate tar

Trends of trade shares, Trends of Trade Shares: India's share in total...

Trends of Trade Shares: India's share in total world exports in 1950 was 1.85 percent and the share in total world imports was 1.7 1 percent. The share of both exports and imp

State about the United States government bonds, State about the unitesd sta...

State about the unitesd state government bonds In most countries, you find government bonds with longer maturity. For example, in the United States you have Treasury notes (two

Balance of payments, factors that causes the shifts in balance of payments...

factors that causes the shifts in balance of payments

Fiscal, what is the supply side

what is the supply side

Problem sets #2, I want to know price and estimate time on this assignment....

I want to know price and estimate time on this assignment.

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd