Michael DaCosta - Finance And Development

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Finance and Development: The Role of International Commercial Banks in the Third World

Michael DaCosta

Although commercial banks have played an increasingly important role in providing capital to developing nations, many analysts argue that private financing poses risks both to borrowing nations and the stability of the international economic system. In response, Mr. DaCosta demonstrates that developing nations that adopt appro-priate policies can gain substantially by drawing on private sources of capital. His analysis indicates that many criticisms of the role of commercial banks are unfounded and that debt problems in LDCs typically are related to inadequate reserve and external debt man-agement policies in the borrowing countries themselves. Emphasizing that economic growth in LDCs often is constrained by balance-of-payment deficits, Mr. DaCosta shows that nations relying on private capital frequently experience higher-than-average growth rates and argues that the advantages of unconditional or untied aid generally outweigh the constraints imposed by the multilateral aid agencies. In conclusion, he outlines specific policies developing nations can adopt to reduce financial risk and, turning to the needs of the poorest of the LDCs, examines a variety of proposals aimed at increasing the flow of concessional assistance to those countries that cannot qualify for commercial bank funds.

Michael DaCosta is senior economist in the Research Department of the Bank of Guyana.

First published 1982 by Westview Press

Published 2018 by Routledge

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Copyright 1982 by Taylor & Francis

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Library of Congress Cataloging in Publication Data

Finance and development

(A Westview replica edition)

Bibliography: p. 146

1. Unerdeveloped areas--Finance. 2. Underdeveloped areas--Banks and
banking. 3. Underdeveloped areas--Financial institutions, International.
I. Title. II. Series.

HG195.D32 1982 332.153091724 82-20276

ISBN 0-86531-917-0

ISBN 13: 978-0-367-02057-6 (hbk)

Many debts have been incurred in the production of this book. Perhaps the greatest is due to the Bank of Guyana for granting me study leave to pursue the research.

In its formation stages, Helen Agard and Deoranee Budhram were especially helpful in the search for data and other sources. As the work progressed, the librarians at the Bank, at The Institute of Bankers, London, and at UWIST provided valuable references.

Professor Glyn Davies, of the University of Wales (UWIST), deserves special thanks for many helpful comments and guidance throughout the research. Thanks are also due to Professor Gethyn Davies and Nigel Allington of UWIST for the useful discussions which I had with both on the issues arising out of the work.

The manuscript was patiently and meticulously typed by Cecelia France despite the presence of several barely-intelligible passages.

A final debt is due to my wife and parents for providing much encouragement and support throughout the research period.

Michael DaCoeta
Georgetown, 1982

The task of achieving rates of economic growth sufficient to improve the standards of living of the people of non-oil less-developed countries continues to be of prime concern to policymakers both within and outside the developing regions. This task is indeed monumental. For example, recent estimates show that by the year 2000, some six to seven hundred million people could be living in absolute poverty. To merely maintain the existing standards of living, a rate of growth of at least 2.5 per cent, equivalent to the average rate of population growth, would need to be achieved.