ABSTRACT
The potential of international lending by banks as a source of international liquidity and balance of payments and development finance has long since been recognized by a handful of academic and bank economists. From the borrowing country’s point of view, much of the attraction of bank finance derives from the flexibility with which it may be applied. International Monetary Fund resources may only be used for balance of payments purposes and their availability is conditional on the achievement of certain specified financial targets. By contrast, bank finance remains largely unconditional. The most serious shocks to the world economy, and the non-oil developing countries in particular, have been the sharp increases in the price of petroleum. Access to bank finance provides an alternative to tied aid; it eanables a country’s negotiators to shop around in the world markets for the best prices and terms on essential materials and equipment required.
