Academic journal article Economic Review - Federal Reserve Bank of Kansas City

Will Capital Be Available for Food Infrastructure Projects?

Academic journal article Economic Review - Federal Reserve Bank of Kansas City

Will Capital Be Available for Food Infrastructure Projects?

Article excerpt

In a global context, entrepreneurs in developing countries can tap two sources of capital to fund their projects. They can borrow abroad or they can rely on funds generated internally and stored in the savings accounts of domestic citizens.

First, consider the prospects for borrowing abroad. The total flow of capital into developing countries slowed sharply in the 1980s, restricted by concern that large loans based on oil revenues might not be repaid after oil prices crashed in the early 1980s. In recent years, markedly improved investment prospects have boosted the flow of capital into the developing world. The total capital inflow soared to an average of $120 billion a year in the 1990s, cresting at $159 billion in 1993. Roughly a third of those funds flowed into Asian countries and about a fourth into Latin America.3

Despite the recent surge, the flow of funds into the developing world remains relatively modest compared with overall global capital flows. For example, the total inflow of capital to developing countries at its recent peak in 1993 was still less than 1 percent of the combined GDP of the OECD nations. In contrast, government financial deficits in the OECD nations were about 4 percent of their GDP. Thus, investment in the developing world has made a relatively small dent in global capital supplies.

While global capital supplies appear ample, most investment in the developing world is funded from domestic savings, with some augmentation by international borrowing.4 In the developing world overall, only 6 percent of total investment was financed with funds borrowed abroad during the past decade and a half. In Asia, where savings rates are the highest in the world, borrowed funds averaged only 2 percent of total investment. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.