International financial developments

Quarterly Bulletin 1985 Q2
Published on 01 June 1985

The US current account deficit reached $100 billion in 1984 and continued unabated into the first quarter of 1985; Japan's surplus was about a third of this size while other major economies remained broadly in balance. The higher overall deficit of the major countries found its counterpart primarily in much reduced deficits of the non-oil developing countries. Developing countries have maintained their concessionary and official borrowing and have built up reserves; during 1984 they became the principal net suppliers of funds to the international banking system.

Changes in the composition and preferences of borrowers and investors since the debt crisis, together with liberalisation and competition, have shifted the focus of international capital markets towards transferable forms of lending. Thus the capital inflow financing the US current deficit towards the end of last year increasingly took the form of port/olio investment-for example in corporate eurobond issues-and was partially matched by Japanese portfolio outflows. Announcements of syndicated credits fell in the first quarter of 1985 to their lowest for ten years-and growing amounts are in transferable form.

In the foreign exchange markets the dollar has retreated from its February peaks. Sterling has recovered much of the ground it lost last autumn and winter.

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