Public Lending and Economic Development: Some Special Problems
In this chapter we shall be concerned with several problems in the field of development lending, including (1) the role of public international lending in planning for economic development, as revealed in current theories of economic development and the policies of public international lending institutions; (2) capacity to absorb capital as a limitation on public international lending; (3) the ability of developing countries to repay foreign loans; and (4) the burden of international lending on the lending countries. As we shall see, most aspects of these topics are interrelated. Thus, the way in which public lending institutions conceive of their role in development of less-developed countries cannot be separated from the concept of capacity to absorb capital. The ability of the borrowers to repay their debts is intimately bound up with the development programs of loan recipients. And the burden of lending depends upon terms and conditions which reflect the borrowers' ability to repay and upon the trade and financial policies of borrowers and lenders.
The policies and operations of external public international lending agencies cannot be analyzed without