The emerging recovery in the industrialised world, particularly the United States, is starting to ease the payments position of the developing countries although much of the reduction in the Idcs' current account deficit stems from steps to restrain their imports. It is important therefore that recovery is sustained if debt problems are to be materially reduced.
In the first half of 1983, the growth of international bank lending continued to slow, but the bond markets were buoyant. The OECD countries and international institutions accounted for the bulk of the money raised. Amounts raised by developing countries in the markets were small, and were not sufficient to meet their financing needs, although banks are committing funds to these countries through rescheduling and associated lending. Consequently, the Idcs have relied increasingly on official sources of finance, especially the IMF. In 1981, Idcs met over half of their financing requirements from the capital markets; by the second half of 1982, it was down to under a quarter and appears to have remained low in the first half of 1983.
In the foreign exchange market the dollar rose to new heights against several currencies on expectations of higher interest rates in the United States. Sterling was generally steady in effective terms.
International financial developments