Economics and Research Staff

The views presented here are those of the author, and they should not be tnterpreted as reflecting those of the World Bank Pu bl ic Di sc lo su re A ut ho riz ed Pu bl ic Di sc lo su re A ut ho riz ed Pu bl ic Di sc lo su re A ut ho riz ed Pu bl ic Di sc lo su re A ut ho riz ed This paper examines the issues associated with the growing foreign indebtedness of the non-oil developing countries. Following a review of the principal changes that occurred in the debt situation of these economies between 1973 and 1983, it analyzes the experiences of countries pursuing different development strategies. It is shown that outward--oriented economies responded to the external shocks of the period largely by the application of output-increasing policies of export promotion and import substitution, limiting their reliance on foreign borrowing. In turn, countries applying inward-oriented policies borrowed extensively abroad, failed to use the ~arrowed funds efficiently, and eventually had to impose strong deflationary measures in order to improve their debt situation The paper next examines the rationale for alternative debt indicators and reports the results of projections made in 1983 by the use of these indicators. The projections are compared to estimates for 1984, with further attention given to the April 1984 IMF forecasts that extend until 1990. Finally, the paper considers alternative policies for the developing countries as well as possible future measures that may be taken by the international community to ease the process of adjustment and to minimize the chances of future debt crises