Official finance requirements in the 1990s

Abstract

Estimates based on a savings gap model with endogenous private bank lending suggest that projections of development aid requirements for sub-Saharan Africa, low-income Asia and Latin America by Fishlow (1987), the Development Committes (1988) and the UN (1988) are too optimistic. A substantial increase in official financial flows to developing countries is necessary. It appears that an increase in private bank exposure by 25%, a 35% debt reduction and a 35% interest reduction (as proposed in the recent Brady Plan) are insufficient to reach minimum growth rates in the three developing regions.