Mr. Jian-Ye Wang, Mr. Yo Kikuchi, Mr. Sidhartha Choudhury, and Mr. Mario Mansilla
This paper assesses the issues of government involvement in international trade finance stemming from the recent changes in global financial markets. This study is based on discussions with representatives of export credit agencies during the period from October 2003 to May 2004. A survey of 27 agencies provided valuable insights. Financial flows facilitated by official export credit agencies are large in comparison with official development assistance and gross lending by international financial institutions to developing countries. However, the importance of officially supported trade finance has been declining relative to the rapid expansion of world trade and total capital flows to developing countries. The study highlights the key challenges facing official export credit agencies, including complementing the private sector, facilitating financing to low-income countries while helping maintain these countries’ debt sustainability, and playing a positive role in the area of trade finance in international efforts to address emerging market financial crises.
Mr. Christopher J. Jarvis, Mr. Balázs Horváth, and Mr. Michael G. Kuhn
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.
This paper presents report on a number of countries in Asia that have made substantial use of agency credits, including the quasi-concessional financing available through mixed credit s. Through their willingness to grant comprehensive relief on a case-by-case basis, official creditors have responded flexibly to the needs of individual countries. The ability of export credit agencies to also provide substantial new financing to rescheduling countries has depended on the strategy of debt subordination achieved through fixing cutoff dates. As to the role of export credits at present, when the debt strategy’s continuing emphasis on new money flows is being supplemented by debt reduction, the debt subordination strategy followed by export credit agencies has left them well positioned to provide necessary new financing for middle-income countries pursuing strong adjustment. In heavily indebted low income countries, whose needs for project finance should most appropriately be met by concessional finance, export credit agencies continue to play an important role in supporting essential short-term credits.
This paper emphasizes on the policy reaction of the agencies and their authorities to countries in various stages of debt-servicing difficulties. It was found that, largely for competitive reasons and provided that significant arrears had not emerged, agencies as a group had tended to remain quite open for debtors pursuing policies that could be expected to lead to payments difficulties, thus facilitating the postponement of necessary adjustment by the debtor and increasing the likelihood of eventual debt-servicing difficulties. Despite this more open stance, the volume of new medium-term credit and cover commitments to developing countries appears to have fallen off sharply over the past two years. Although for some debtors the operative constraint is clearly on the supply of new credits and cover, this is not the general case and, indeed, agencies reported net repayments from some countries for which they were wide open for new business.