International financial developments

• Following a further weakening in demand for oil and continued rapid growth of their imports, the oil exporters' surplus has shrunk considerably; the main counterpart has been a reduction in the combined deficit of major OECD countries.
• Oil importing developed and developing countries alike made greater use of reserves in financing current account deficits in the first three quarters of 1981.
• Partly reflecting this pattern of deficit financing, there was a continued slowdown in the underlying growth of international bank credit in the third quarter of the year.
• Exchange markets were both nervous and volatile from August. Important factors were interest rate developments, the OPEC oil price discussions and the realignment of currencies within the European Monetary System.
• Sterling fell sharply early in September but recovered after the authorities had moved to raise short-term interest rates.

International financial developments