World Bank Document

guarantee that enough foreign exchange will be
generated. In Jamaica, Peru, and Turkey, vulnera-
bility to debt-servicing difficulties was especially
high in the 1970s because policy distortions led to
export growth slower than in most other middle-
income countries. Obviously, the best solution to
this problem is to remove the distortions. Turkey
reversed its policies in the early 1980s and export
growth accelerated dramatically. Where it is not
goods (exportables or import substitutes) or goods
that could not be internationally traded, such as
education, electricity, or piped water, would be
irrelevant: so long as rates of return were higher
than the cost of the borrowed funds, output and
savings would be raised, leaving an extra exportable
surplus large enough to repay the debt.
However, where policy-induced price distortions
occur, as in many developing countries, there is no
Figure 4.3 Investment, savings, and the current account balance in selected country groups, 1960-83
Percentage of GNP
Industrial countries
Oil-importing developing countries
Percentage of GNP
30 30
20 - 20
10 10
0 0
-10 -10
Middle-income oil exporters
Latin America and the Caribbean'
Percentage of GNP
Percentage of GNP
30 30
Gross domestic investment
20-\ 2 ~
Gross national savings
10 10
0 _
Difference between GNS and GDI
-10 Current account deficit -10
Percentage of GNP Africaa Percentage of GNP South Asia
30 30
20 20
10 _ \10
10
-1010 -'N.
-10
1960 1965 1970 1975 1980 1983 1960 1965 1970 1975 1980 1983
Note: Data for developing countries are based on a sample of forty-four countries.
a. Excluding oil exporters.
Source: World Bank data.
49