Abstract
It is axiomatic that a developing country, with a limited ability to increase domestic savings, may step up its rate of real economic growth by borrowing some of the savings of other countries to supplement its own. With these borrowings, such a country may increase its imports of goods and services to undertake additional development projects. As a result, a developing country attempting to step up growth is likely to have a deficit in the current account of its balance of payments and a net capital inflow. But it is well known that some countries pursuing growth through external borrowings run into balance-of-payments difficulties. This happens when the current-account deficit exceeds the net capital inflow and there are not enough accumulated international reserves on hand to fill the gap. The strategy of growth through external borrowings clearly has its limits, and the question then arises regarding to the way to maintain an approximate balance between the current-account deficit and the net capital inflow. Common sense suggests and experience has shown that the answer lies in a combination of five separate lines of action that the borrowing country should take. This chapter presents these lines of action.
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