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International Monetary Fund

To better understand agencies’ cover policy response in various situations, the staff discussed with the 11 agencies and their export credit authorities the evolution of cover policies toward a sample of 14 developing countries. That sample was selected for both geographical distribution and the representation of countries in a wide range of circumstances regarding their external position and their relations with official creditors. Case studies of the agencies’ response over time to developments in these 14 countries are presented below. Charts showing

Mr. Eduard H. Brau

The initial reaction of export credit authorities to the debt-servicing difficulties that emerged in 1982 and the related reschedulings was to apply the same policies concerning new credit cover that had been developed and used over many years for isolated, single-country problem cases. Recently, however, it has been increasingly recognized that such a policy approach could be counterproductive in the aggregate when applied to a range of debtor countries that were experiencing problems but implementing satisfactory adjustment policies and that had reasonable

Mr. Eduard H. Brau

At the onset of the debt difficulties in 1982, most export credit authorities applied their traditional principles guiding cover policies, which had been developed over many years to deal with country-specific and isolated debt problems. Medium- and long-term cover was suspended for a large number of debtor countries that rescheduled debts, although short-term cover was generally retained if the debtor country was current on such obligations. Most export credit agencies also began to emphasize more rigorous countryrisk assessment procedures and employed more

Mr. Eduard H. Brau

export promotion but not as a form of export subsidy, and export cover policies are a means of considerable commercial competition among creditor government authorities. At the same time, export credits are expected to assume increasing importance in transferring capital to developing countries and, when used effectively, can promote their economic growth. Since early 1984, most export credit authorities have shown marked flexibility and willingness to adapt policy during a time when their agencies have experienced considerable financial pressure as a result of

Mr. Eduard H. Brau

credits: “… developing countries and export credit agencies, in cooperation with the World Bank and the Fund, should take steps to enhance the development impact of export credits.” It was in this setting that Export Credit Cover Policies and Payments Difficulties 1 was published in August 1985. That paper described the objectives of export credit authorities and the practices of their agencies and focused in particular on their response to the emergence of widespread debt-servicing difficulties. Subsequent to the finalization of the present study, the

Mr. Eduard H. Brau

diverse. For example, among the 11 such countries that the Fund staff discussed with export credit authorities, 5 countries (Malawi, Mexico, Nigeria, the Philippines, and Turkey) experienced substantial gains in export credits over the 18 months to mid-1985, while others faced declines of varying amounts in such credits ( Table 4 ). For the rescheduling countries as a group, officially supported export credits increased much less strongly than for other developing countries, a fact which can be attributed to both demand and supply factors. On the demand side, most

International Monetary Fund

Abstract

This paper discusses developments and issues concerning export credits from the perspective of the economic adjustment process of indebted developing countries. This emphasis is consistent with the principle that officially supported export credit—whether it takes the form of direct official credits or insurance and guarantees on privately funded credits—is an instrument of commercial financing for exports and not a means of aid finance. All creditor governments have a broad range of objectives in using the economic instruments at their disposal to help overcome the adjustment problems of heavily indebted countries, with which important bilateral trade relations are being maintained. In support of an expansion in world trade and notwithstanding the competitive element, export credit insurance and guarantees may have a special role in helping to catalyze private credit flows, especially since such a role coincides with the interest of private lenders to shift away from general purpose balance of payments finance to trade and project finance.

K. Burke Dillon

the 24 agreements concluded since May 1984 with countries that had previous reschedulings in recent years was the cutoff date changed. 3 Export credit agencies and their governmental authorities regard a firm cutoff date as essential to the maintenance or resumption of new official export credits and cover, as it gives a measure of assurance that new loans will not be caught up in future reschedulings. Indeed, export credit authorities have expressed the view that one of the most important features of a MYRA is that it increases confidence that the cutoff date will

International Monetary Fund

to the time when arrears escalated sharply and substantial claims payouts were made. Then they tightened policies sharply. This section has set out in broad terms the general response of agencies and their authorities to countries in differing circumstances. The following sections describe the various policy instruments used by agencies and discuss more specifically how cover policies and export credit programs have been adapted to meet the changing objectives of export credit authorities. Instruments of Export Credit Cover Policy In all of the countries

International Monetary Fund

export credit authorities. Instruments of Export Credit Cover Policy In all of the countries visited, a system for the guarantee/insurance (jointly referred to as “cover”) of suppliers’ credits or bank-financed buyers’ credits is a key element of the export promotion system. For Belgium, the Netherlands, and the United Kingdom, such guarantee/insurance programs are the only regular vehicle for official support of export financing on commercial terms. However, most creditor countries also stand ready to provide direct commercial finance for exports, usually in