International Monetary Fund

In accordance with the request of the United Nations Economic and Social Council, the International Monetary Fund submitted to the Council's thirteenth session, a study on the capacity of underdeveloped countries to service investments of foreign capital. With compensatory financing eliminated from its consideration, the remainder of the country's international receipts appeared to furnish a reasonable total with which to compare its foreign debt service. Such a total would include the goods and services the country was able to sell abroad, the foreign capital that it was able to attract by its investment opportunities and the donations that it received for particular purposes other than compensatory financing. This total would be subject to wide fluctuations. Markets for the raw materials exported by underdeveloped countries were notoriously subject to sudden shifts in demand which could drastically affect both volume and price. Again the capital flow to underdeveloped countries could be suddenly interrupted if the markets for their raw material exports turned weak or if they pursued unstable or confiscatory policies at home. The dangers to an underdeveloped country's balance of payments position arose from the wide fluctuations in the value of raw material exports and inflow of capital that might occur almost overnight. It was these that raised questions of how quickly and how far imports of goods and services could be contracted in order to permit the service of the foreign debt to continue to be paid in full.