Commodity Prices, Aid and Debt: Implications for LDCs, Small Vulnerable States and HIPCs
Commonwealth Secretariat, 2004 - Business & Economics - 165 pages
The long run of decline in real commodity prices has had significant implications for least developed countries, small vulnerable states, and heavily indebted poor countries, which rely predominantly on primary commodities for their production and exports. Empirical investigation in this study has shown that the persistent downward trend in real commodity prices has resulted in significant foreign exchange losses for many commodity-dependent poor countries.
Since the long-term solution to declining commodity prices lies in export diversification and changes in the production structure, as opposed to policies that encourage price and revenue stability, the study proposes a Joint Diversification Scheme exclusively for export diversification schemes in the commodity-dependent poor countries. For the aid-based compensation scheme, the study proposes the establishment of a Joint Diversification Fund in addition to regular aid flows.
Efforts towards export diversification will have to be complemented by domestic policies aimed at the development of human resources, creation of a hospitable investment climate, institutional capacity building and poverty alleviation to achieve a sustainable solution.
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aid flows average billion Burkina Faso cent per annum cn cn cn cn ro Cocoa Coffee commodity price index commodity-dependent Cote d'lvoire Cotton Cuddington debt relief decision point developing countries donors economic estimated export earnings Export Growth Fish foreign exchange losses Grilli Grilli-Yang HIPC Initiative HIPCs HIPCs and SVSs individual commodities LDCs long-run manufactured o o o o o o o oooooooooooooooooo Papua New Guinea poor countries prices of primary primary commodities primary exports problem purchasing power relative commodity price relative price ro cn ro ro ro root testing Sapsford scheme secular decline STABEX stationary Sugar SVSs and HIPCs SYSMIN t/lb terms of trade trend decline rate trend equation trend growth rate trend rate UNCTAD unit root variable World Bank Yes Yes Zambia