The United Arab Emirates (UAE) was adversely affected by a series of external and domestic shocks in 2009, including the global economic slowdown, the shutdown of international capital markets, and the impact of the bursting Dubai property bubble in mid-2008. Oil receipts plummeted, global trade and logistics contracted, as did property and construction activities. Executive Directors have welcomed the ongoing engagement with Dubai World’s creditors and stressed the importance of a speedy, orderly, cooperative, and predictable approach to debt restructuring.
This paper analyses possible approaches to a model of world trade and payments. Any world economic model resulting from linking national models together will inevitably have some of the characteristics of these national models. Since the national models that are to be connected are, overall, constructed so as to explain short-run variations in aggregate economic magnitudes such as economic activity, employment, and over-all price levels, the resulting world economic model will be best suited to explain short-term variations in trade and financial flows and the relationships between these flows and the policies conducted in the various countries with respect to the adjustment of demand and economic activity in the short run. Any model intended to explain the trade flows among many countries and regions must have strong microeconomic features it must be more nearly Walrasian than Keynesian. The practicability of building into a trade model the appropriate microeconomic features of this sort is, of course, a function of the size and degree of disaggregation of the model.
It is argued in this paper that, since economic welfare is influenced by the payments objectives pursued by countries, economists should explore the objectives that are indicated as being appropriate by welfare economics, rather than accepting objectives that have been arbitrarily specified and restricting their analysis to the question of how those objectives can be achieved. The concept of payments objectives involves targets for both the change in reserves and the structure of the balance of payments. The paper assumes that the private sector supplies the optimal quantity of stabilizing speculation, so that there is no need for reserves to change, and the problem is solely that of determining the optimal capital flow. This permits a discussion of the sources of welfare gain from capital flows, the qualifications to the classical prescription of free capital flows, and the case for a code of conduct to limit countries' freedom to restrict capital movements. It also implies that in the long run any maldistribution of reserves should be corrected by adjusting the current account rather than by borrowing reserves or manipulating the capital account.
Sources: BIS; JEDH; authorities; and Fund staff estimates and calculations.
1/ Orders of magnitude, estimated mainly from creditor data.
2/ Including insuredexportcredit and off-balance sheet bank guarantees.
Annex Table 3.
U.A.E.: International Investment Position, Orders of Magnitude
In billions of U.S. dollars (including local currency-denominated)
International debt securities (by residency of issuer)
at the end of 1982, amounting to roughly one fourth of the outstanding external debt of these countries (see Table 1 , p. 19). In this period, such credits increased from the equivalent of 39 percent of non-guaranteed commercial bank credits to 41 percent. Furthermore, because of widespread payments difficulties, a large proportion of insuredexportcredit has been subject to debt rescheduling (see Table 2 , p. 20). Credit risks have increased generally, and the response of the agencies to this increase will have a major influence on the mix as well as the
, on the external debt of developing countries. 74 The statistics cover official development assistance and officially supported lending, including insuredexportcredit, reported in the OECD CRS 75 and BIS data on bank lending. The CRS shares many essential features of the World Bank DRS; the two systems are designed to be as complementary as possible. The CRS obtains data from 21 OECD member countries on a loan-by-loan basis.
403 . OECD statistics provide another useful source of data on international debt and may be used to validate nationally compiled data or
-credits is also explained by their flexibility and simplicity of administration. Borrowers might prefer a Euro-credit at a floating interest charge to an insuredexportcredit in order to obtain the most competitive rate by paying off the supplier in cash and also to avoid the complex process of assembling separately the finance for downpayments, for local expenditure, and for supplies from sources other than those covered by the prime supplier’s export credit insurer. 18 In evaluating these positive aspects of Euro-currency credits, it is to be noted that not all credits
the 1960’s has been the increasing role of credits over five years. The share of net insured credits with maturities over five years increased from 23.3 per cent in 1956 to 26.5 per cent in 1960 and to 73 per cent in 1968. Although comparisons between credits of up to five years and over five years must be interpreted with caution, 9 data for a few countries indicate that insured credits in excess of five years were rare prior to 1960 (for public credits, see below). In Belgium only 4 per cent of insuredexportcredits including credits under one year were for
which Fund staff participated, to discuss external debt problems.
Fund staff also continued regularly to attend as observers the semiannual meetings of the Union d’Assureurs des Crédits Internationaux (the Berne Union), comprising a large group of governmental and related public agencies, including some from developing countries, which guaranteed or insuredexportcredits, including short-term trade credits. At these meetings, the agencies represented exchanged information on their operations and reviewed attitudes toward specific countries. This information gave