Financing development and oil imports in the developing nations

Technical Report · Mon Dec 01 04:00:00 EST 1980

DOI:https://doi.org/10.2172/6721581· OSTI ID:6721581

Reilly, J

Rising oil prices represent an additional drain on scarce capital resources in the oil-importing developing countries. Faced with higher oil import bills, these countries must make internal adjustments aimed at reducing energy consumption or generating additional foreign exchange. While these internal adjustments imply slower growth and lower living standards in countries where vast segments of the population are already impoverished, failure to adjust can only mean ever-rising levels of debt and ever-greater dependence on foreign assistance. Foreign borrowing was heavily used to spread out and ease adjustment during the 1973 to 1974 oil price hike. Examination of several measures of debt load indicates incomplete financial recovery from these earlier oil price hikes. As a result, most LDCs are in a considerably weaker position as they face the oil price hikes of 1979, and private lenders are hesitant to extend additional loans. It is unlikely that concessionary aid will expand to fill the gap left by reduced private lending. Lack of external capital will force internal adjustment on these countries. Reducing general consumption to pay for oil would have dismal consequences for those already living in poverty - politically, such a strategy would be nearly impossible. The alternative - slower economic growth - while equally pernicious, is more likely to be chosen, if only because the consequences are less immediate.

• Research Organization: Oak Ridge Associated Universities, Inc., TN (USA). Inst. for Energy Analysis
• OSTI ID: 6721581
• Report Number(s): ORAU/IEA-80-14(M)
• Country of Publication: United States
• Language: English

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DEVELOPING COUNTRIES
ECONOMIC GROWTH
ECONOMIC IMPACT
ECONOMICS
ENERGY CONSUMPTION
ENERGY SOURCES
FINANCING
FOSSIL FUELS
FUELS
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INDUSTRY
INSTITUTIONAL FACTORS
INVESTMENT
PETROLEUM
PETROLEUM INDUSTRY
PRICES
SOCIO-ECONOMIC FACTORS