STABEX

The STABEX scheme was designed to stabilize earnings from exports of the African, Caribbean and Pacific (ACP) countries to the Community.  It covered seventeen agricultural commodities and iron ore.  The original forty-six ACP countries later rose to fifty-two so that it involves substantial number of developing countries, many of them rather small, poor and vulnerable.  But the commodities whose earnings are intended to be stabilized amount to only 20 percent of the export earnings of the ACP countries.  In 1976, its first year of operation, seventeen ACP countries drew SDDR 72 million.  In the same year ACP counties drew SDR124 million from the IMF scheme and LDCs total drawings for 1976 were SDDR 1,575 million.

The total sum allocated to STABEX for the whole period 1976 - 80 was only about  $420 million and conditions for eligibility were quite stringent.  The exports had to be crude or in very elementary processed form.  Individually they had to account for at least 7.5 percent of the country's total merchandise exports to all destinations.  The shortfalls, calculated in nominal terms, had to be at least 7.5 percent below the average earnings from the product the ECC over the previous four years.  For the least developed, land-locked or island economies these two conditions are dropped to 2.5 per cent.

The terms for repayment are liberal.  Compensation payments to the least developed countries are in the form of grants and for the others the loans are interest free and repayable as and when export earnings recover.  The STABEX can be criticized for discriminating between ACP and other LDCs and for being too limited in coverage and funds.  This has the effect of making it liable to political influence when decisions have to be made on rationing funds between intending borrowers.  The idea of making compensation payments grants to the least developed countries is widely commended as an appropriate change for adoption by the IMF\CFF.  But is it sensible to confuse transfers intended to promote development with assistance intended to deal with temporary financial imbalances?  The criteria for allocating funds for each of these purposes should be quite different.  Of course situations may arise where what was intended as a short-term loan has to be re-phased.   Instead of exports rising in the next   three years they may drop still further or there may be drop and still unforeseen events need special ad hoc arrangements and that basically is the attitude of the IMF.