Word: ldcs
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...have been forced to borrow voraciously from big banks, notably in the U.S. Now, that rising mountain of debt is casting an ominous shadow across the international banking scene. A growing number of monetary experts, bank regulators and economists are concerned about the ability of some less developed countries (LDCS) to pay off. They worry that a series of defaults could severely jolt the banking systems of the U.S. and other major lending countries-and perhaps imperil the Western economies...
OPEC Surpluses. The quickening flow of loans to those LDCS that do not produce oil is particularly bothersome. A study by Morgan Guaranty Trust Co. shows that net new international borrowing by these countries leaped by $109 billion from only 1974 through 1976. In all, the non-oil LDCS now owe about $180 billion. Such a huge expansion of overseas lending, mostly by private American financial institutions, heightens the possibility of a series of defaults that could cause panic to spread through international banking. So far, banks have managed to avoid this danger by renewing the loans or stretching...
Political Pressures. To keep this flood of cash moving and to make a profit, U.S. banks have been lending these funds to LDCs. But, Triffin believes, in taking on this responsibility the banks are making themselves too vulnerable to pressures from their oil-rich depositors. In any disagreement with U.S. policy, a bloc of OPEC nations could quickly withdraw its deposits, possibly leading to a dangerous disruption in the foreign exchange market...
...very least, more of the burden of lending to LDCs should be shifted to the World Bank and the International Monetary Fund. That, of course, would require additional funding by rich nations for these lending institutions. One major benefit of a strengthened IMF and World Bank: they could lay down loan conditions that would require borrowing countries to cut unnecessary spending and take other steps to reduce inflation...
...worse off than Italy and Britain. The root cause of their problem: soaring oil bills caused by OPEC's quintupled prices. While a small handful of OPEC countries have been amassing a $150 billion balance of payments surplus, the non-oil producing less developed countries, or LDCs, have plunged into debt by almost the same amount-$142 billion-to pay for petroleum. In only three more years, that debt load is expected to rise to a staggering $241 billion...