World Bank Document

Figure 4.2
Income level and access to borrowing from official and private sources
Access to official finance
Access to private finance
Debt from official sources as a percentage of GDP
Debt from private sources as a percentage of GDP
50 60
40
Egypt
50 a Costa Rica
* Liberia Ivory Coast a
0 Zambia 40
30 Jamaica New Guinea @ Chile
30 / @ Argentina
20 * Bolivia Ni,Uer a *a Venezuelaa
20_ Bolia _0
* Morocco *
Costa Rica 20 e Mexico 5-
v * , @ *
*@ Korea
10 . . o~~~~~~~~~~~~~~~~~~~0 Yugoslavia
to ~~~010 s
India a KoTea 0 Clobi
igeria @ @Malaysia Uruguay *, a Colombia
O 0 0 Nigeria ~ e , Venezuela. VenezueIa 0 .*India Ethiopia I Guatemala
O $1,000 $2,000 $3,000 0 $1,000 $2,000 $3,000
GNP per capita
GNP per capita
v Latin America and Caribbean s Sub-Saharan Africa 0 South Asia * East Asia and Pacific Europe and North Africa
Note: Debt ratios and GNP per capita are averages for 1980-82. Debt from official sources here includes bilateral concessional loans and
multilateral loans; it excludes official export credits. Debt from private creditors comprises supplier credits and loans from financial markets,
including private banks and bonds. The negative relationship between official debt and GNP per capita is significant at the 99 percent
confidence level, with R 2 = .43 The positive relationship between private debt and GNP per capita is significant at the 95 percent confidence
level, with R 2 = .11. Data are for a sample of forty-four countries.
a. For Venezuela, GNP per capita is $4,042.
Source: World Bank data.
underlies the so-called debt cycle (see Box 4.1). In These countries were net lenders to the rest of the
1960-83, domestic savings financed about 90 per- world for brief periods following two rounds of oil
cent of the investment in developing countries; in price increases, but were otherwise substantial
industrial countries, savings actually exceeded borrowers. Declines in oil-based incomes during
domestic investment requirements by about 3 1981-82 depressed domestic savings and reduced
percent.
inflows of foreign savings, forcing even larger cor-
However, patterns of saving and investment of rections in investment.
groups of countries began to change perceptibly * In contrast, the low-income countries of South
after 1973, as shown in Figure 4.3.
Asia were able to increase domestic savings from
* The traditional surplus of savings generated the late 1960s to finance higher levels of investby
the industrial countries was reduced, with two ment, reducing in relative terms their use of forbrief
periods of deficit in 1974 and 1979. eign capital. (Statistical Appendix, Table A.11,
* This coincided with the increased reliance of gives details for forty-four developing countries.)
oil-importing developing countries on foreign Figure 4.4 suggests that, until recently, countries
capital inflows, first to finance greater investment that borrowed tended to raise their investment
and later to replace declining domestic savings. rates. The positive relationship between borrow-
Latin American countries demonstrate this pattern ing and investment is statistically significant in the
best. 1965-72 and 1973-78 periods, but not in 1979-83.
* In Africa, the long-term decline in domestic The link between borrowing and growth is more
savings was more significant.
complex. As Figure 4.5 shows, the relationship
* Middle-income oil exporters began raising between changes in the debt to GDP ratio and ecoinvestment
in the early 1960s; the domestic sav- nomic growth was positive but not significant in
ings effort began improving from the late 1960s. the 1965-72 and 1973-78 periods. In the latter
46