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Mr. Christopher J. Jarvis, Mr. Balázs Horváth, and Mr. Michael G. Kuhn

resulting from the different definitions used by agencies are of limited significance. Volume of New Export Credits Background: The Contraction of Export Credits in the 1980s The recent increase in the volume of new export credits has been particularly striking because it followed a precipitous decline in the overall level of export credit activity during the 1980s. New commitments of medium- and long-term export credits dropped sharply as most debtor countries responded to balance of payments difficulties by cutting back public sector investment programs

International Monetary Fund

some other countries attracted little new finance. In particular, new commitments to heavily indebted poor countries in 1994 remained low. 57 Financial Performance of Export Credit Agencies Despite the increase in export credit activity, the financial performance of most export credit agencies has remained weak as measured by net cash flow, the indicator of financial performance most commonly used by the agencies themselves. Throughout the late 1980s and early 1990s new claims payments, which have been over $10 billion in each year since 1990, exceeded

Mr. Christopher J. Jarvis, Mr. Balázs Horváth, and Mr. Michael G. Kuhn

Abstract

This study discusses the importance of export credits, their recent growth, and the trend toward more extensive reliance by official bilateral creditors on export credits as an instrument of financial support, and raises a number of issues regarding the role and limitations of export credit financing, espeically for economies in transition.

International Monetary Fund

, there was a precipitous decline in export credit activity, and new export credit business remained low throughout the 1980s. 26 In 1989, however, lending activity to middle-income countries started to pick up again, and recent data indicate that this upswing has continued. 27 Data compiled by the Export Credit Group of the OECD suggest that the net flow of export credits to middle-income countries increased by 17 percent in 1991, although lending to low-income countries declined by about 2 percent. Preliminary data for 1992 confirm the continued growth in export

International Monetary Fund

claims on the former Soviet Union); the next largest exposure was to China (9 percent) and Indonesia (about 6 percent), reflecting the strong export credit activity in these countries in recent years. Other countries with large ECA’s exposure were Algeria, Brazil, and Poland where the share of total agencies’ exposure remain in the range of 4–6 percent each. Chart 2. Twenty Main Recipients of Export Credits Among Developing Countries and Countries in Transition, 1990 and 1995 (Percent share in agencies’ portfolio) 1/ Sources: Berne Union; and IMF staff

Mr. Christopher J. Jarvis, Mr. Balázs Horváth, and Mr. Michael G. Kuhn

the end of 1993 the total exposure of export credit agencies (excluding intra OECD business) had grown to an estimated $380 billion and accounted for more than one fifth of the total external debt of developing countries and the economies in transition. In the course of 1994, total exposure has risen further, to over $400 billion. The driving force behind this resurgence in export credit activity has been more aggressive export promotion by many governments, which has reinforced the demand for investment goods in a wide range of countries. Officially supported

Mr. Jian-Ye Wang, Mr. Yo Kikuchi, Mr. Sidhartha Choudhury, and Mr. Mario Mansilla

almost 30-fold, from $48 million to $1.5 billion. The ECGC was established by the Indian government in 1957 to provide insurance to Indian exporters against trade-related country and buyer risks. It also provides export-related guidance (including country credit ratings and creditworthiness of overseas buyers) and assists exporters in recovering bad debts. The ECGC earned a gross premium income of $95 million in 2003/04 as compared with $80 million in 2002/03. China: Export Credit Activity (In billions of U.S. dollars) Sources: China Exim Bank, and the

International Monetary Fund
Export credit agencies (ECAs) have played a critical role in financing for developing countries in recent years, and officially supported export credits have been growing in volume. The current export credit exposure to developing countries and economies in transition has reached almost half a trillion dollars. This paper reviews developments in export credit markets affecting exposure, new commitments, and cover policy for developing countries and economies in transition and discusses three key issues affecting export credit markets: a more widespread involvement of ECAs in project financing transactions, a strong presence of ECAs in the market for investment insurance, and a deepening of the forfeiting market.
K. Burke Dillon

and, second, that the debtor country will take the steps necessary to eliminate the causes of its payments difficulties and to achieve a durable improvement in its external payments position. For countries that are Fund members, creditors rely on the Fund to help the debtor country design appropriate adjustment measures and have therefore required that an upper credit tranche arrangement with the Fund be in place prior to the initiation of debt renegotiations. Creditor governments, both in the Paris Club and, particularly, in their export credit activities, have

International Monetary Fund. External Relations Dept.

percent annually, in contrast to the 10 percent during 1990–94. In 1995, as in previous years, exposure was heavily concentrated in a handful of countries. Ten middle- and low-income countries accounted for more than half of the exposure. Export credit exposure in Russia (12 percent of the total) largely reflected claims on the former Soviet Union. For China (9 percent) and Indonesia (6 percent), exposure reflected strong export credit activity (see box, page 200). New Commitments . New commitments increased by $20 billion, to $107 billion in 1995. Roughly 1 percent