Chapter

Chapter 8 Balances of Payments of Selected Countries

Author(s):
International Monetary Fund
Published Date:
September 1964
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IT will be apparent from what has been said in the preceding chapters that the developments in the balances of payments of six countries—the United States, the United Kingdom, Italy, France, the Federal Republic of Germany, and Japan—were of crucial importance in 1963. Chart 23 reflects these developments. This chapter discusses them in some detail, and summarizes very briefly the balances of payments of the other manufacturing countries. The balances of payments of some representative primary producing countries are also surveyed.

Chart 23.Selected Manufacturing Countries: Over-All Surpluses and Deficits, 1958–63

(In billions of U.S. dollars)

United States

Developments in the balance of payments of the United States in 1963 have been dominated by two main influences: a rise in the trade surplus and wide fluctuations in movements of private capital. A very large net outflow of private capital in the first half of the year was followed by a sharp reduction in the second. Government programs to reduce expenditures abroad have also continued to support the balance of payments; in part, this support has taken the form of tying of aid and is reflected in a rise in exports.

Under the impact of the economic upswing that started three years ago, the trade surplus fell from an annual rate of about $6.5 billion in the trough of the recession to somewhere between $4 billion and $5 billion in the period from the second half of 1961 to the first half of 1963. During this period it exhibited no clear trend. Since then it has steadily risen, and in the first quarter of 1964 it was above the $6.5 billion level of three years earlier. During most of this period, both exports and imports were rising slowly at about the same rate. Since mid-1963, however, there has been a rather sharp rise in exports, while imports have changed only marginally (Table 19). Much of the recent rise in exports comprised agricultural commodities, and it is partially attributable to the poor harvests in 1963 in several countries in Eastern and Western Europe. The failure of imports to rise is probably explained in part by the comparatively slow rate of growth in U.S. industrial output and of inventory accumulation during the second half of 1963. Nevertheless, it is noteworthy that, after three years of sustained growth in the domestic economy, the trade balance is as favorable as it was before the upswing began. During the same period, the rise in income from foreign investments was considerably larger than the net adverse change in other (nonmilitary) services―particularly the rising expenditures for foreign travel.

Table 19.United States: Balance of Payments Summary, 1962-First Quarter 19641(In millions of U.S. dollars)
19631964 2
19621963First

quarter
Second

quarter
Third

quarter
Fourth

quarter
First

quarter
A. Goods, Services, Aid, and Long-Term Capital Main categories, seasonally adjusted, excluding advance debt repayments
Exports financed by government grants and capital2,3632,720579815633693617
Other exports f.o.b.18,21319,2184,4054,6444,9645,2055,470
Imports f.o.b.–16,134–16,931–4,017–4,197–4,353–4,364–4,347
Trade surplus4,4425,0079671,2621,2441,5341,740
Net military expenditures–2,388–2,263–566–525–619–553–507
Other services, remittances, and pensions2,2711,943509418485531743
Government grants and capital–3,694–3,879–900–1,177–826–976–735
Private long-term capital–2,609–3,188–1,098–910–380–800–672
U.S. direct investment abroad–1,654–1,862–581–451–236–594–463
New foreign security issues–1,076–1,269–481–518–183–87–132
Transactions in outstanding foreign securities–96–6–59–68328999
Redemptions and other U.S. long-term capital–55–36924–77–61–255–188
Foreign long-term capital272318–1204684712
Total–1,978–2,380–1,088–932–96–264569
Seasonal influences20087–64435782
Advance debt repayments68132625342412654
Total–1,297–2,054–863–811–499119705
B. Unrecorded Transactions–1,111–28626112–277–14742
C. Short-Term Capital, n.i.e.
U.S. private assets–553–69661–532121–346–630
Prepayments for military equipment47035920–5105239140
Other foreign nonliquid capital3776–125351–165
Foreign liquid capital342156116978–2–52
Total296–10580–415355–125–537
D. Liquid Liabilities to Foreign Commercial Banks–12943838675–318322
E. Total (B through D)–94447492–22847–264–173
F. Reserves and Related Items
Liquid liabilities to central banks and governments37081,629339915225150–481
U.S. convertible currency holdings (increase—)17–113–336–28–58–228
IMF position (increase—)62630–4625915131
Gold sales8904611111161963846
Total2,2412,0073711,039452145–532
Memorandum item: reduction in monetary reserve assets and increase in liquid liabilities, seasonally adjusted 42,2032,6441,0721,30013214042
Source: U.S. Department of Commerce, Survey of Current Business, June 1964.

No sign indicates credit; minus sign indicates debit.

Preliminary.

Changes in foreign official holdings of U.S. Government nonmarketable, medium-term, inconvertible securities (credit of $251 million for the fourth quarter of 1962 and $63 million for the first quarter of 1963 and debit of $10 million for the second quarter, $95 million for the third quarter, and $1 million for the fourth quarter of 1963, and $55 million for the first quarter of 1964) are included with liquid liabilities.

Excluding the U.S. Government securities referred to in footnote 3.

Source: U.S. Department of Commerce, Survey of Current Business, June 1964.

No sign indicates credit; minus sign indicates debit.

Preliminary.

Changes in foreign official holdings of U.S. Government nonmarketable, medium-term, inconvertible securities (credit of $251 million for the fourth quarter of 1962 and $63 million for the first quarter of 1963 and debit of $10 million for the second quarter, $95 million for the third quarter, and $1 million for the fourth quarter of 1963, and $55 million for the first quarter of 1964) are included with liquid liabilities.

Excluding the U.S. Government securities referred to in footnote 3.

During the first half of 1963, the outflow of U.S. private long-term and short-term capital reached a peak equivalent to an annual rate of a little more than $5 billion, partly because of an extraordinary volume of new issues of foreign securities, which reached an annual rate of about $2 billion. During the second half of the year, the outflow of capital was much lower—equivalent to about $3 billion annually. Some part of the reduction is attributable to the bill pending before the Congress, proposing an interest equalization tax applicable to foreign securities with certain exceptions (e.g., direct investment and issues by less developed countries); this bill had not been enacted by June 1964. The net outflow on account of new issues and of transactions in foreign securities fell by almost $1 billion from the first to the second half of 1963. However, the outflow of other U.S. long-term capital (excluding direct investment but including bank loans for more than one year, which are not covered by the proposed tax) rose at the same time at an annual rate of $500 million.

Underlying the U.S. program to support the balance of payments has been the policy of stimulating growth under conditions of price stability and maintaining short-term interest rates at levels not conducive to large outflows of interest-sensitive funds. There have also been programs to promote exports and to reduce the effect of government expenditure abroad on the balance of payments, e.g., through tying of aid to purchases in the United States. Efforts to curtail military expenditures have been counteracted by a tendency for prices to rise in several overseas countries where U.S. troops are stationed; such expenditures, at a little less than $3 billion, were only marginally lower in 1963 than they had been three years earlier. At the same time, however, military receipts have increased, mainly in respect of equipment made available to other countries, and a further reduction in military expenditures net of such receipts is anticipated. The reduction in net cash foreign expenditures for military purposes between 1960 and 1963 totaled about $800 million. In addition, government-financed exports rose by about $800 million during this period.

The over-all U.S. deficit, as measured by Group F in Table 19, was not much changed from 1962 to 1963, but the outflow of gold was reduced from about $900 million to about half this amount. One of the factors underlying this change was a much larger increase in world monetary gold holdings in 1963 than in 1962. Foreign monetary authorities were thus able to convert larger amounts of dollar reserves into gold through purchases from other sources, rather than from the U.S. Treasury. At least as important was the change in the distribution of balance of payments surpluses and deficits, a large share of the surplus accruing in 1963 (but not in 1962) to the primary producing countries, which keep a comparatively high proportion of their reserves in foreign exchange rather than in gold. Part of the accumulation of reserves in some European countries took the form of nonmarketable U.S. Government securities.

The outlook for the U.S. balance of payments early in 1964 appeared more favorable than it had been for many years. Exports were, of course, being supported by some transitory factors, and some rise in imports appeared likely with the acceleration of the rise in economic activity expected to result from the tax cut effective from March 1. Nevertheless, prospects for the trade balance appeared good, the U.S. competitive position having been strengthened by considerable rises in costs in many of the other industrial countries since 1959. Although economic activity was rising at a substantial rate, pressures on capacity were not in sight. Further economies could be expected from programs to reduce government expenditures abroad. Finally, the capital account was being increasingly supported by three years of sustained growth under conditions of monetary stability, as well as by increasing confidence in the U.S. dollar.

United Kingdom

In the United Kingdom, the current account was in surplus for the second successive year (Group A in Table 20). Between 1962 and 1963, exports rose slightly more than imports. Exports responded to the stimulus of the large increase in world trade and rose by 7 per cent between 1962 and 1963. This expansion coincided with an upturn in domestic demand, fostered by official measures taken in the second half of 1962 and early in 1963. The general upturn in activity, supported by an accumulation of inventories on a considerable scale in the closing months of 1963, caused imports to rise throughout the year. Indeed, imports rose at a faster pace than exports during much of 1963, even though prices and wages rose less in the United Kingdom than in most other industrial countries outside North America. As a result, the seasonally adjusted current account surplus, which had been running at an annual rate of close to $800 million in the first quarter of the year, dwindled to a small figure by the fourth quarter. The net export of long-term capital increased in 1963 to a level approaching that of the late 1950’s, in contrast to 1961 and 1962, when special factors and conditions reduced the net outflow. In spite of this shift, the recorded current and long-term capital accounts were in broad balance in 1963, as they had been in 1962 (item C in Table 20. However, the balance of recorded long-term capital movements also deteriorated in the seasonally less favorable second half of the year, and the combined balance on current and capital accounts changed from a surplus in the first half to a deficit in the second half.

Table 20.United Kingdom: Balance of Payments Summary, 1962–First Quarter 19641(In millions of U.S. dollars)
19631964 2
19621963First quarterSecond quarterThird quarterFourth quarterFirst quarter
A. Goods, Services, and Transfer Payments
Exports f.o.b., seasonally adjusted11,17511,9672,8922,9653,0353,0753,097
Imports f.o.b., seasonally adjusted–11,365–12,090–2,836–2,979–3,108–3,167–3,396
Trade balance, seasonally adjusted–190–12356–14–73–92–299
Services and transfer payments, seasonally adjusted47646214398112109126
Total, seasonally adjusted286339199843917–173
Seasonal influences19106–117–8–14
Total, unadjusted286339218190–789–187
B. Capital Movements, n.i.e.
Official long-term–294–294–28–28–70–168–78
Official liabilities to nonmonetary international institutions72446–1250–5
Private long-term
Investment abroad (net)–725–924–232–249–227–216–272
Investment in U.K. (net)770380611229121818595
Total–177–368–4214–91–149–260
C Total (A plus B)109–2976204–169–140–447
D. Errors and Omissions240–358–139–55–164249
E. Private Short-Term Capital Movements, n.i.e.
Miscellaneous capital
3223
–93–79–1711–8–48
Foreign currency liabilities (net)–4946–58–31–698
Sterling holdings other than Group F
Sterling area countries238 392–381157–14334
Other countries–673–22–2885314667–95
Total493–72–32459283–90–11
F. Official Monetary Movements
IMF position–1,0601486–1
European central bank assistance250–250
Sterling holdings of overseas central monetary institutions
Sterling area countries–115 3370118126–31157115
Other countries–182 3–73–112–109–1115998
U.K. gold and currency reserves (increase—)
Gold–31498135–592225
Foreign currencies82950–1431013656–28
Total–842459248–124–59394209
Source: Central Statistical Office, Economic Trends.

No sign indicates credit; minus sign indicates debit.

Preliminary.

Data are not fully comparable with those for later periods because of reclassifications. In particular, official sterling holdings in 1962 cover the holdings of all official institutions overseas.

Source: Central Statistical Office, Economic Trends.

No sign indicates credit; minus sign indicates debit.

Preliminary.

Data are not fully comparable with those for later periods because of reclassifications. In particular, official sterling holdings in 1962 cover the holdings of all official institutions overseas.

Short-term capital movements are hard to assess, but there is little evidence of any appreciable flows of funds through the exchanges after a period early in 1963, when sterling was under speculative pressure following the cessation of the negotiations between the United Kingdom and the European Economic Community. The covered margin between U.K. and U.S. Treasury bills was broadly neutral during 1963 apart from this period (see above, p. 57). Nevertheless, there was a large unrecorded debit in 1963, which may have been associated with increases in export credits, as well as with the fact that monetary and credit conditions in the United Kingdom were relatively easy at a time when there was a fairly general tightening in the credit situation in some other financial centers. In the last quarter of the year unrecorded transactions nearly always show a sizable debit balance, at a time when the deficit on other accounts is swollen by the seasonal payments on U.S. and Canadian loans. This pattern was repeated in 1963, so that the over-all balance of payments, as measured by Group F in Table 20, was in deficit in the last quarter. There was also an over-all deficit for the year as a whole, but its impact on reserves was mitigated by a build-up of foreign sterling reserves. Rising prices for a number of commodities, combined with a further large increase in the inflow of capital, enabled the overseas sterling area not only to add to its sterling holdings on an appreciable scale, but also to increase its holdings of gold and non-sterling convertible currencies.

In the first quarter of 1964, the current account went into deficit, as a result of a further substantial rise in imports coinciding with little change in exports. The deficit on account of long-term capital transactions also accelerated. These adverse developments were not, however, reflected in reserves, which benefited from the favorable balance of payments of overseas sterling area countries with non-sterling countries and from an increase in commercial banks’ net liabilities in foreign currencies; also, unrecorded transactions were more favorable than is usual in this quarter.

Sterling, after holding steady for almost a year, came under short-lived pressure in February 1964. On February 27, the bank rate was raised from 4 per cent to 5 per cent, mainly to help to moderate the pace of expansion, but also in the hope that it might lead to a more appropriate pattern of short-term rates. The U.K. authorities have stated that the rise in the bank rate was not intended to attract short-term funds across the exchanges.

Italy

The present balance of payments problem of Italy is of relatively recent origin. During the period 1958-62 (Chart 23), the Italian balance of payments generally showed surpluses; these were in large part attributable to a number of structural factors, which were discussed in the Annual Report for 1960 (p. 98). The slow rise in wages up to 1961, which helped both to encourage exports and to lessen the rate of growth of imports, was partly the result of a comparatively high level of unemployment—and underemployment—in agriculture. This, however, was progressively reduced as a result both of migrations to other countries and of Italy’s own high rate of economic expansion. Gradually the rapid expansion internally, together with large-scale employment of Italian workers in other European countries, gave rise to upward pressures on incomes and prices. These in turn led to a weakening of the current account of the balance of payments (Group A in Table 21), particularly through a rise in imports. The process has now reached the point where structural influences are operating to worsen the payments position. Not only does the reduction in unemployment increase pressure for upward wage adjustments, but the rise in real income creates sharply rising demands for certain types of consumption, notably higher quality foodstuffs and consumer durables. For the former, Italian production and distribution are not yet rationalized; the latter used to a substantial degree to be exported.

Table 21.Italy: Balance of Payments Summary, 1962–First Quarter 19641(In millions of U.S. dollars)
1963219642
19621963First quarterSecond quarterThird quarterFourth quarterFirst quarter
A. Goods, Services, and Transfer Payments
Exports f.o.b.34,5824,9691,1791,2401,2591,2911,333
Imports f.o.b.3–5,459–6,776–1,4731,653–1,809–1,841–1,811
Trade balance–877–1,807–294–413–550–550–478
Transportation and merchandise insurance3–100–172–18–42–63–49–18
Travel3724749187199189174172
Workers’ earnings32872996899943878
Other services3–34–15–2–38214–27
Private transfers34732173826110566
Official transfers–53–32–8–8–8–8–3
Total, seasonally adjusted294–6576–121–256–286–210
Seasonal influences–200–9728017–215
Total, unadjusted294–657–194–21824–269–425
B. Capital Movements (excluding Groups D, E, and F) and Net Errors and Omissions
Remittances of Italian banknotes–766–1,470–525–492–160–293–262
Foreign investments in Italy880
246
Italian investments abroad–428879451–29824106–29
Other and net errors and omissions7133
Total–243–591–74–194–136–187–12
C. Total (A plus B)51–1,248–268–412–112–456–437
D. Commercial Banks’ Net Foreign Assets (increase—)430650154383202–89–197
E. Advance Repayment of Foreign Debt–179
F. Official Monetary Movements
IMF position40–23–15–8225
Gold and free exchange (increase—)–223841158–115376233
Other foreign assets of UIC and Bank of Italy (increase—)–320237–12140177176
Total–30259811429–90545634
Source: Ufficio Italiano dei Cambi, Movimento Valutario, and Bank of Italy.

Current items (Group A) are on a transactions basis; all other items are on a payments (exchange record) basis. No sign indicates credit; minus sign indicates debit.

Preliminary.

Seasonally adjusted.

Source: Ufficio Italiano dei Cambi, Movimento Valutario, and Bank of Italy.

Current items (Group A) are on a transactions basis; all other items are on a payments (exchange record) basis. No sign indicates credit; minus sign indicates debit.

Preliminary.

Seasonally adjusted.

A major deterioration of the current account balance set in during 1962 and continued in 1963 (Table 21) as the rise in money incomes and prices accelerated. The balance of payments problem was further compounded by large and increasing outflows of private capital (excluding net borrowing by the commercial banks, but including unrecorded transactions—see Group B in Table 21), attributable to several causes: political factors, uncertainty among investors caused by the nationalization of the assets of the electricity industry, and the imposition of a withholding tax on dividends (the latter two measures becoming effective from January 1, 1963). Between November 1962 and September 1963 the deficit on all these accounts was met by an inflow of funds borrowed by Italian commercial banks, mainly in the Euro-dollar market. After the third quarter of 1963, however, the banks were ordered not to increase their borrowings abroad, and were requested to reduce, where possible, their net foreign liabilities. Since then the reserves have declined markedly, while the authorities have also made use of other types of compensatory financing, including swap facilities and other inter-central-bank borrowing. In March 1964 the Italian authorities negotiated a total of about $1 billion of foreign credits and similar facilities, including $450 million of medium-term credits made available by the United States. Italy also drew $225 million within its gold tranche at the Fund. Part of the recent decline in reserves is attributable to repayment of foreign credits by the commercial banks, but preliminary balance of payments statistics for the first quarter of 1964 indicate that it is mainly the result of a continuation of a substantial current account deficit.

The deficit on current account (including all transfer payments) in 1963 exceeded $600 million, and the outflow of capital (Group B in Table 21) reached about the same total. Both were undoubtedly influenced by some temporary unfavorable factors, and the sum of the two cannot be regarded as a reasonable indication of the magnitude of the underlying balance of payments problem that was in evidence during 1963. Imports were higher than usual because of poor harvests in 1962 and 1963. (A more favorable harvest is in prospect for 1964.) The outflow of capital was also much larger than could normally be expected; in fact, given the restoration of confidence and monetary stability, Italy is likely once again to become a net importer of capital.

In addition to tightening bank credit, beginning in 1963, the Italian authorities have introduced since the autumn of that year a series of fiscal measures to slow down the rise in demand and prices. In September and October 1963, indirect taxes on certain luxury items were raised, measures were taken to encourage the expansion of exports, and rent control was imposed for two years. It was also decided to avoid any increases in government expenditure and to reduce the budget deficit. A special purchase tax was levied in February 1964 on motorcars and pleasure craft, gasoline taxes were increased, and strict hire-purchase restrictions were imposed on a wide variety of consumer durable goods. In an attempt to revive the capital market, stamp duties on stock exchange transactions were reduced, and the system of taxing dividends was amended. By these means, and in conjunction with a tight control over the supply of credit, the Italian authorities hope to prevent further deterioration in the current account of the balance of payments in 1964 and to stem the outflow of capital. The official forecast of the 1964 current deficit is that it will be of the same order of magnitude as last year.

France

After the depreciation of the French franc and the adoption of stabilization measures late in 1958, the balance of payments of France remained exceptionally strong for several years. It was only during the latter part of 1963 and early in 1964 that signs of an adjustment to a more balanced position became convincing. At that time weakening of the surplus position was associated with inflationary tendencies in the French economy, which became stronger in 1963 as the year progressed. For the year as a whole, the growth in total demand clearly exceeded that in output. As upward pressure on domestic prices intensified late in the year, the current account of the balance of payments including all transfer payments—Group A in Table 22—changed from surplus to deficit. The main factor was a sharp rise in imports from the non-franc area.

Table 22.Franc Area: Balance of Payments Summary, 1962 and 1963 1(In millions of U.S. dollars)
1963 2
19621963First quarterSecond quarterThird quarterFourth quarter
A. Goods, Services, and Transfer Payments
Exports f.o.b.5,8496,6931,5551,6281,6061,694
Imports f.o.b.–5,364–6,574–1,524–1,616–1,508–1,808
Trade balance485119311298–114
Services3232327889761
Transfer payments2089–7361430
Total828440102137119–23
B. Private Long-Term Capital
Foreign direct investment in France25120546373864
Other foreign capital21424461746034
French direct investment abroad–49–91–30–9–16–23
Other French capital–1414336532624
Total40250111315510899
C. Official Long-Term Capital
Advance debt redemption–583–281–61–220
Other official–139–148–32–36–58–23
Total–722–429–32–97–278–23
D. Total (A through C)508512183195–5153
Total, excluding advance debt redemption1,09179318325616953
E. Private Short-Term Nonmonetary Capital
Operations pending settlement42–47–601923–11
Other–114–76–11–35–39
Total–72–123–6120–12–50
F. Total (D plus E)436389122215–633
G. Net Transactions of Overseas Franc Area1501385023950
H. Net Errors and Omissions1212744934265
I. Commercial Bank Short-Term Capital3
Liabilities28339133371152–14
Assets (increase—)–195–189–189–79–12150
Total88202144–83136
J. Official Monetary Movements
IMF position–12–123–10–5
Other liabilities–13–39–105–8–18
Foreign exchange (increase—)–195–217–228–22621514
Monetary gold (increase—)–466–588–122–105–216–145
Total–686–856–360–323–19–154
Source: Data provided by the French authorities.

Groups A through F cover settlements on account of transactions of Metropolitan France with the non-franc area, while Group G covers the net impact of all similar settlements on account of the rest of the franc area, including changes in its foreign exchange assets and liabilities vis-à-vis the non-franc area. Groups I and J cover changes in assets and liabilities of institutions in Metropolitan France arising from transactions of both parts of the franc area with the rest of the world. No sign indicates credit; minus sign indicates debit.

Preliminary. The figures for the full year 1963 differ somewhat from the corresponding totals of the quarterly figures because certain adjustments are made to the annual figures but not to the quarterly data.

Commercial bank long-term capital is included in private long-term capital (Group B).

Source: Data provided by the French authorities.

Groups A through F cover settlements on account of transactions of Metropolitan France with the non-franc area, while Group G covers the net impact of all similar settlements on account of the rest of the franc area, including changes in its foreign exchange assets and liabilities vis-à-vis the non-franc area. Groups I and J cover changes in assets and liabilities of institutions in Metropolitan France arising from transactions of both parts of the franc area with the rest of the world. No sign indicates credit; minus sign indicates debit.

Preliminary. The figures for the full year 1963 differ somewhat from the corresponding totals of the quarterly figures because certain adjustments are made to the annual figures but not to the quarterly data.

Commercial bank long-term capital is included in private long-term capital (Group B).

For 1963 as a whole, the current surplus with the non-franc area, as provisionally estimated, fell to about half the annual rate of the high and rather steady surpluses for the four preceding years, which averaged about $800 million. However, as in other recent years, the current surplus was accompanied by a large net inflow of private capital, which even rose slightly from 1962 to 1963. Allowing for the fact that most of the errors and omissions item (a relatively substantial credit in the provisional estimates for 1963) is probably appropriate to current account and private long-term capital transactions, the combined surplus on these accounts appears to have been of the order of $1 billion, or only about $200 million less than in 1962. On the other hand, the outflow of official (government) capital was substantially lower than in 1962 as advance debt repayments were reduced. As a result, the increase in French reserves ($856 million, including the IMF gold tranche position) was some $170 million higher than the year before.

In the first few months of 1964 the continuing excess demand was reflected in a further rapid rise in imports and in a moderate deficit on current account. Since the restrictive policies adopted by the French authorities are expected to bring about a slowing down of the rate of growth of imports later in the year, a small deficit—or even a close balance—of the current account is officially forecast for the whole of 1964. Any deficit, however, is expected to be more than offset by the continuing inflow of private capital and a reduced outflow of official capital. Official reserves increased by about $225-250 million during the first five months of 1964, and while this is a significant reduction from the increases in reserves recorded in the last few years, the balance of payments position of France remained strong.

Federal Republic of Germany

A major balance of payments surplus (as measured by Group F in Table 23) emerged in Germany in the course of 1963. Initially, the surplus arose from a massive inflow of private capital, mainly through purchases of German securities. These purchases were encouraged by relatively high yields and, probably, by the desire of certain foreign investors to seek a safe haven for flight funds. Later, a progressive improvement in the balance on current account (Group A in Table 23) was a contributory factor, in large part as a consequence of renewed inflationary pressures in a number of European countries. For example, exports to Italy, where inflationary pressures have been particularly strong, were one third higher in 1963 than in 1962, but imports from that country fell by 1 per cent. Similarly, exports to France rose by 18 per cent between 1962 and 1963, while imports rose by only 4 per cent. Compared with other recent years, German exports were generally favored by the less rapid growth of internal demand in Germany. This has moderated the upward movement of domestic prices and wages, and appears to have induced entrepreneurs in many industries to intensify foreign sales. At the same time, the better competitive position of German industry, particularly as regards delivery time, has caused some slowdown in the growth of imports. The small size of the increase in imports in 1963 was partly attributable to a better harvest in 1962 than in 1961. Expenditures abroad by German tourists rose very little in 1963, following very sharp increases in preceding years, while tourist expenditures in Germany increased. This trend can also be ascribed partly to divergent price trends in Germany and other tourist countries.

Table 23.Federal Republic of Germany: Balance of Payments Summary, 1962–First Quarter 19641(In millions of U.S. dollars)
19631964
19621963First quarterSecond quarterThird quarterFourth quarterFirst quarter
A. Goods, Services, and Transfer Payments
Exports f.o.b.13,23614,5673,2253,6263,6584,0583,888
Imports c.i.f.–12,263–12,994–3,021–3,316–3,325–3,332–3,272
Other merchandise–227–104–34–26–33–11–59
Trade balance7461,469170284300715557
Paid services to foreign troops1,0751,072267263258284249
Other services–1,092–1,082–191–299–377–215–234
Total goods and services7291,459246248181784572
Transfer payments–1,282–1,239–325–327–323–264–274
Total–553220–79–79–142520298
B. Long-Term Capital
Bonds1574439992132120
Shares401543680353108
Other private long-term capital6318851714224
Advance debt redemption
Other government long-term capital–296–295–38–70–64–123–49
Repayments on post-EPU claims3636332733
Other Bundesbank assets (increase—)2641–5712
Total65301521711792864
C. Total (A plus B)–547750739237548362
Total, excluding certain extraordinary transactions3–58971069943544357
D. Short-Term Capital (excluding Groups E and F) and
Net Errors and Omissions
Government29–792973143–324–93
Commercial bank credits (net)–9632–97–2910256–153
Other1055182–1111–177173
Net errors and omissions231–132848252–350212
Total269–174198115308–795139
E. Commercial Banks’ Liquid Foreign Assets (net)
Foreign exchange (increase—)67–73–223–56–62268–235
Foreigners’ deposits–8217–65109–61234–167
Total59144–28853–123502–402
F. IMF Position and Net Reserves
IMF position120–35–2–25–8–92
Bundesbank liabilities 45–2919–7–25–168
Foreign exchange (increase—)5110–49170–248–164–14995
Monetary gold (increase—)–16–165–70–5–8–82–110
Total219–72017–260–222–255–99
Source: Deutsche Bundesbank, Monthly Report, May 1964.

No sign indicates credit; minus sign indicates debit.

Covers IBRD bonds and notes and repayments received on consolidated credits and other Bundesbank assets of limited-usability.

This balance is intended to facilitate analysis of the more basic factors in the balance of payments. It excludes the following extraordinary transactions: (a) advance debt redemption, (b) repayments on post-EPU claims, and (c) other Bundesbank assets (see footnote 2). However, it includes private transactions in securities, which are likely to fluctuate widely in the short run. Such transactions should be taken into account in evaluating the balance.

Excluding liabilities to the IMF (a credit for the second quarter of 1963 and a debit for the third quarter of 1963, each of $5 million).

Foreign exchange covers freely usable foreign exchange and earmarked assets.

Source: Deutsche Bundesbank, Monthly Report, May 1964.

No sign indicates credit; minus sign indicates debit.

Covers IBRD bonds and notes and repayments received on consolidated credits and other Bundesbank assets of limited-usability.

This balance is intended to facilitate analysis of the more basic factors in the balance of payments. It excludes the following extraordinary transactions: (a) advance debt redemption, (b) repayments on post-EPU claims, and (c) other Bundesbank assets (see footnote 2). However, it includes private transactions in securities, which are likely to fluctuate widely in the short run. Such transactions should be taken into account in evaluating the balance.

Excluding liabilities to the IMF (a credit for the second quarter of 1963 and a debit for the third quarter of 1963, each of $5 million).

Foreign exchange covers freely usable foreign exchange and earmarked assets.

The balance of payments position of Germany appeared very strong early in 1964. Export orders pointed to a continuation of a high level of export shipments for some time. A relatively good harvest in 1963 was keeping imports of farm products from rising sharply, and industrial imports were rising considerably less than exports despite a resumption of faster domestic growth. The proposed introduction of a 25 per cent withholding tax on the income from German fixed-interest-bearing securities owned by nonresidents may reduce somewhat the attractiveness of foreign security purchases in Germany. Such action had been suggested to Germany by a number of countries which impose similar taxation on nonresidents. Similarly, measures taken in March by the Deutsche Bundesbank against short-term inflows may also help to reduce the capital inflow. These measures comprised increases up to their legal maximum in the minimum reserve requirements against foreigners’ deposits, and prohibition of the payment of interest on time deposits by nonresidents. At the same time, the proposal to abolish the 2½ per cent tax for domestic and foreign bond issues as well as for foreign share issues may also contribute to increase capital exports. Furthermore, the proposed 25 per cent withholding tax for nonresidents is not intended to apply to income from foreign bonds issued in Germany. In the first four months of 1964 foreign bond issues were larger than total issues in 1963. The recent reintroduction of swap transactions by the Deutsche Bundesbank, whereby commercial banks hold U.S. Treasury bills to the same amount, is apparently intended to eliminate part of the domestic impact of the surplus. Looking further ahead, effective measures taken in other European countries to combat inflation and protect balances of payments could, of course, affect the German balance of payments position to an important degree.

Japan

The balance of payments of Japan has exhibited large swings in the postwar period, but has tended to be in surplus over the long run. Investment booms led to deficits in 1957 and 1961, giving rise to substantial adjustments in the domestic economy, which temporarily brought the steep rise of industrial production to a halt. After the 1957 balance of payments crisis, Japan experienced three years of rapid economic growth with only a moderate rise in prices and wages and its balance of payments was in substantial surplus. Since then, wages and prices have risen more rapidly. While industrial production again started to expand at a high rate after the slowing down associated with the 1961 crisis, the balance of payments problem arose again in the second half of 1963, only two years after the crisis of 1961. Moreover, whereas during the years 1958-60 and 1962 Japan had surpluses on current account, it has subsequently become dependent on an inflow of capital (Groups B and F in Table 24). Much of the recent inflow has been in the form of borrowing from foreign commercial banks, including import usance facilities.

Table 24.Japan: Balance of Payments Summary, 1962 and 1963(In millions of U.S. dollars)
1963 2
19621963 2First quarterSecond quarterThird quarterFourth quarter
A. Goods, Services, and Private Transfer Payments
Exports f.o.b.4,8615,3901,1141,2781,4121,586
Imports f.o.b.–4,459–5,544–1,229–1,384–1,408–1,523
Trade balance402–154–115–106463
Special government receipts337735685919090
Other services and private transfer payments–743–897–201–205–230–261
Total36–695–231–220–136–108
B. Private Long-Term Capital
Direct investment–19–21108–4–35
Other1675138223193107
Total148492922398972
C. Central Government Transfer Payments and
Nonmonetary Capital
Reparations and loans extended–81–125–40–30–28–27
IBRD loans received (net)5032111254
Other4–43–32–6–8–8–10
Total–74–125–35–26–31–33
D. Total (A through C)110–328–174–7–78–69
E. Net Errors and Omissions56284–3646–32
F. Private Short-Term Capital
Nonmonetary sector1089718193129
Commercial banks
Liabilities101854165260114315
Assets (increase—)–87–43860–114–110–274
Total1225132431653570
G. Treasury and Bank of Japan Monetary
Capital and Gold
Liabilities4101–224–133–89–1–1
Payments agreements16142624
Official reserves (increase—)–354–37–22–39–428
Total–237–247–153–122–331
Source: Data provided by the Japanese authorities.

No sign indicates credit; minus sign indicates debit.

Preliminary.

Including sales to U.S. and UN forces under the special procurement program.

Yen subscription, other than the amount immediately converted into dollars, to the International Development Association ($6.5 million for 1962) and the corresponding increase in liabilities are excluded from this table.

Source: Data provided by the Japanese authorities.

No sign indicates credit; minus sign indicates debit.

Preliminary.

Including sales to U.S. and UN forces under the special procurement program.

Yen subscription, other than the amount immediately converted into dollars, to the International Development Association ($6.5 million for 1962) and the corresponding increase in liabilities are excluded from this table.

In 1963 the rise in exports moderated, although remaining substantial, and barely kept pace with that in imports (Table 24). The current account (Group A in Table 24), which had been in surplus in the second half of 1962 (and showed a very small surplus for 1962 as a whole), turned into deficit in 1963. The deficit on current account was, however, considerably smaller than the inflow of capital (including the change in the net liabilities of the commercial banks). As a result, reserves were slightly higher at the end of the year than at the beginning, even though the monetary authorities had repaid $225 million of foreign credits. The proposal of a U.S. interest equalization tax in July limited the possibilities of long-term borrowing in the U.S. market, but Japan has increasingly resorted to borrowing from U.S. banks, and had also placed a considerable amount of new issues in Europe (Germany, Switzerland, and the United Kingdom) by the end of 1964.

In the current upswing, the Japanese Government took measures earlier than on similar previous occasions to prevent the boom from becoming excessive and to protect the balance of payments. Indications in the first quarter of 1964 were that the deterioration in the current account balance had continued, mainly because of the increase in imports. There have, however, been signs of improvement in the trade balance as a result of a series of tight money measures introduced since the end of 1963. One factor which supported the Japanese balance of payments was that economic conditions appeared favorable in Japan’s main export markets, such as the United States, in contrast to those which prevailed when the 1961 Japanese balance of payments crisis was developing.

Other Manufacturing Countries

The balances of payments of the other manufacturing countries in 1962 and 1963 are recorded in summary form in Table 25. It will be seen that there were generally only quite small changes in the balance of payments of these countries on current and long-term account excluding certain extraordinary transactions (Column 5 in Table 25), and also only rather small imbalances on these accounts in 1963. The main exception was Denmark, whose balance of payments improved markedly, largely as a result of the changes in its trade mentioned in the preceding chapter. There was a slowdown in the reserve accumulation of Austria, in part related to the developments in its trade also discussed in Chapter 7. An accumulation of reserves in Belgium by over $200 million in 1963, following little change in 1962, was roughly offset by a deterioration in the net foreign assets of the commercial banks. Similarly, a rise in the Netherlands reserves was largely attributable to an inflow of short-term capital, other transactions—after prepayments of $68 million on debts to foreign governments—being in approximate balance. The Swiss balance of payments continued to be in surplus, in spite of a continuation of a current deficit and of a reported outflow of long-term capital, because of large inflows in respect of unrecorded transactions.

Table 25.Other Manufacturing Countries in Continental Europe: Balance of Payments Summaries, 1962 and 1963 1(In millions of U.S. dollars)
Goods,

Services,

and Private

Transfers

(1)
Official

Transfers

and

Capital2

(2)
Other Nonmonetary

Long-term

Capital

(3)
Extraordinary

Transactions 3

(4)
Basic

Balance

(Col.

1+2+3

minus

Col. 4)

(5)
Other Nonmonetary

Short-term

Capital

and Errors

and

Omissions

(6)
Net Commercial

Bank

Short-term

Assets4

(7)
Net

Reserves 4,5

(8)
Austria196265199718180–4–257
196325–58910971–45–135
Belgium-Luxembourg1962124–8416–207624–11232
1963–28–1424–1814228–224
Denmark1962–2402878–134525923
1963152887130107–21–216
Netherlands1962185–113–11–2687–77115
196377–63–14–6868183–15–168
Norway1962–168–1299–15–6658212
1963–18632195–145512–2–51
Sweden1962–13–3156–2032718–91
1963–38–4–53–9575–2343
Switzerland1962–3368–221808–49–210
1963–400–200736–136
Source: Based on data reported to the International Monetary Fund. For 1963, the data for some countries are provisional and are not comparable with those for 1962.

No sign indicates credit; minus sign indicates debit.

Excluding capital movements considered as reserve movements; see footnote 5.

Included in column 2; mainly advance debt repayments, but include also all repayments on post-EPU debts.

Increase (—).

Reserve movements generally cover changes in official holdings of gold and foreign exchange assets, in short-term liabilities of the central monetary sector, and in IMF position. Repayments on post-EPU claims and debts are included with official transfers and capital.

Source: Based on data reported to the International Monetary Fund. For 1963, the data for some countries are provisional and are not comparable with those for 1962.

No sign indicates credit; minus sign indicates debit.

Excluding capital movements considered as reserve movements; see footnote 5.

Included in column 2; mainly advance debt repayments, but include also all repayments on post-EPU debts.

Increase (—).

Reserve movements generally cover changes in official holdings of gold and foreign exchange assets, in short-term liabilities of the central monetary sector, and in IMF position. Repayments on post-EPU claims and debts are included with official transfers and capital.

* * *

It is clearly not possible to attempt detailed balance of payments analyses for all the primary producing countries. In the following pages, therefore, the selection has been confined to one country from each continent (except Europe), with the preference given to countries in which there were marked changes from 1962 to 1963.

Argentina

Following two years of considerable difficulty, 1963 brought some relief to the balance of payments of Argentina notwithstanding a continuing and heavy budget deficit financed largely by recourse to the Central Bank, and price increases of 20-25 per cent (Table 26). The main factor underlying the improvement was a change from a trade deficit of $140 million in 1962 to a trade surplus of $384 million in 1963. This change arose in part from an increase in exports following a substantially larger increase from 1961 to 1962. At $1,365 million, exports were higher in 1963 than in any year since 1948 and about 30 per cent above the average for the preceding five years. The increase in exports from 1962 to 1963 was accounted for mainly by meat, sugar, wool, and fruits, and was partly attributable to higher prices, in particular for sugar and wool. The increase in the volume of meat exports was attributable to increasing overseas demand, which led to a diversion of supplies from the domestic market. Wheat exports were low as a result of a poor harvest.

Table 26.Argentina: Balance of Payments Summary, 1959-631(In millions of U.S. dollars)
19591960196119621963
A. Goods, Services, and Private Transfers
Exports 21,0091,0799641,2161,365
Imports 2–993–1,249–1,460–1,356–981
Trade balance16–170–496–140384
Services and private transfers–5–35–90–134–1292
Total11–205–586–274255
B. Capital movements
Private, excluding banks101364293–52–90
Central Government3148164216
Commercial banks–125–1445–26
Net errors and omissions–6–179–104
Total1083804524–106
C. Reserve movements
Official reserves (increase—)–217–306201306–131
IMF position404831–914
Other (mainly Central Bank liabilities)5883–98–27–32
Total–119–175134270–149
Source: Data provided by the Argentine authorities.

No sign indicates credit; minus sign indicates debit.

Exports mainly f.o.b.; imports mainly c. and f.

Including Central Government transfer payments.

Source: Data provided by the Argentine authorities.

No sign indicates credit; minus sign indicates debit.

Exports mainly f.o.b.; imports mainly c. and f.

Including Central Government transfer payments.

About three fourths of the improvement in the trade balance arose, however, from a decline in imports, which were $375 million less than in 1962 and nearly $300 million below the average for the preceding five years. In part, this decline is to be regarded as a reaction to an excessively high level of imports of machinery and equipment in earlier years; these had responded to an investment boom which had been stimulated by large inflows of capital in 1960 and 1961, including some direct investment capital as well as suppliers’ credits. In large part, however, the reduction in imports was attributable to the continuing effects of the depressed level of economic activity associated with political uncertainties which characterized 1962. Activity began to improve during the second quarter of 1963 and the recovery quickened after the elections in July; nevertheless, total output may have been about 5 per cent lower in 1963 than in 1962, partly owing to crop failures at the beginning of the year. In addition to the factors mentioned above, imports of oil fell from about $90 million in 1962 to less than $60 million in 1963, continuing the declining trend in recent years, attributable to rising domestic production which was sufficient to cover the country’s needs; in 1958 imports of oil had amounted to about $250 million.

In both 1962 and 1963 there appears to have been a small net outward movement of private capital, contrasting with a substantial net inflow during the preceding three years. In 1962 there was a substantial inflow of funds in the form both of long-term capital and trade credits, which was offset by repayments of earlier credits and by capital withdrawals brought about by political instability. In 1963, on the other hand, the inflow of foreign capital was apparently reduced by the continuing uncertainties and the lower level of import demand. Capital withdrawals also appear to have abated during the year and after the elections there may have been some repatriation of funds. Contractual repayments against suppliers’ credits, however, continued at a high rate, leading to a net outflow on private capital account, although arrangements were concluded with the main European creditor countries, the United States, and Japan for the refinancing of part of the credits maturing in 1963 and 1964, and other refinancing credits were negotiated with foreign commercial banks.

With a comparatively small change in net capital movements, the rise in the trade balance was largely reflected in an improvement in the over-all balance (Group C in Table 26), which changed from a deficit of $270 million in 1962 to a surplus of about $150 million in 1963. The reserves of the Central Bank, which had been very low at the beginning of 1963, were replenished in the course of the year and in December reached a level corresponding to a little more than three months’ imports, although they were still below the Central Bank’s foreign liabilities. During most of the year the exchange rate fluctuated within narrow limits; there was a temporary depreciation during the third quarter, but at the end of the year the rate for the U.S. dollar was about the same as it had been a year earlier.

Australia

The balance of payments of Australia was in surplus in 1963 for the third year in succession (Table 27); the increase in reserves, the largest recorded during the postwar period, reached almost $500 million. The surplus resulted mainly from a substantial rise in exports, although an increased inflow of capital was a contributory factor.

Table 27.Australia: Balance of Payments Summary, 1960–63 1(In millions of U.S. dollars)
1960196119621963
A. Goods, Services, and Transfer Payments
Exports f.o.b.1,9922,3512,3702,796
(Exports of wool valued at 1960 prices)(781)(793)(797)(788)
(Exports of wool at actual prices)(781)(815)(828)(972)
Imports f.o.b.–2,256–2,004–2,196–2,332
Trade balance–264347174464
Services and transfers–627–566–527–628
Total–891–219–353–164
B. Private Capital (including errors and omissions)494529458661
C. Official Capital392135–7
D. Total (A through C)–358331140490
E. Monetary Movements
IMF position–25175–176–26
Official and banking reserves (increase—)383–50636–464
Total358–331–140–490
Source: Based on data from the Commonwealth Statistician.

No sign indicates credit; minus sign indicates debit.

Source: Based on data from the Commonwealth Statistician.

No sign indicates credit; minus sign indicates debit.

The rise in exports was in a large part attributable to higher prices, although there was also a considerable increase in volume. The value of exports rose by 19 per cent from 1962 to 1963, while the export price index rose by 11 per cent. Exports of wool, the main export commodity, the volume of which continued to run at the high level of recent years, benefited from a price rise of almost 20 per cent; exports of wheat rose also appreciably, mainly as a result of a 44 per cent rise in volume coinciding with a 5 per cent decline in price. As in other recent years a substantial portion of wheat exports went to countries in the Sino-Soviet Area, particularly Mainland China.

The rising trend in exports in recent years has helped to support substantial growth in the Australian economy, which accelerated further in 1963. By the end of that year, gross national product in real terms appeared to be running at a rate possibly 5-6 per cent higher than in the final quarter of 1962. In spite of the substantial rise in export prices, a remarkable degree of domestic price stability was maintained throughout 1963.

The substantial surplus in Australia’s balance of payments in 1963 assisted in the financing of the over-all balance of payments deficit of the United Kingdom, because only $18 million of the increase in Australian official reserves was in the form of gold holdings, most of the remainder being added to Australia’s sterling balances.

Canada

The high degree of stability in Canada’s over-all balance of payments (as measured by Group E in Table 28) that was re-established after the exchange crisis in the second quarter of 1962 was maintained during the first half of 1963. It was interrupted by outflows of capital following the proposal by the U.S. administration in July of an interest equalization tax, but uncertainties about the Canadian foreign exchange position were relieved by the large sale of wheat and flour to the Soviet Union arranged in September. The exchange rate depreciation culminating in the establishment of a new par value in May 1962 has undoubtedly strengthened the current account of the balance of payments (Group A in Table 28). Even though the broad array of import surcharges introduced at the time of the 1962 exchange crisis was abolished early in 1963, the current account deficit was reduced from 1962 to 1963 by over $300 million, to a little over $500 million, the lowest figure since 1954. During the period 1956-61, the current account deficit had ranged between $ 1,000 million and $1,500 million, and the recent reduction is in accordance with the Canadian Government’s policy of lessening the country’s dependence on an inflow of foreign capital and the accompanying net imports, under conditions of continuing slack in the economy.

Table 28.Canada: Balance of Payments Summary, 1962 and 19631(In millions of Canadian dollars)
1963 2
196219632First quarterSecond quarterThird quarterFourth quarter
A. Goods, Services, and Transfer Payments
Exports6,3647,0641,4821,7721,8012,009
Imports–6,209–6,580–1,412–1,700–1,657–1,811
Trade balance1554847072144198
Nonmonetary gold16516645413842
Transportation–90–85–14–22–33–16
Travel–5013–67–26113–7
Investment income–570–614–151–137–134–192
Other services–387–391–93–101–99–98
Transfer payments–71–94–28–16–15–35
Total–848–521–238–18914–108
B. Long-Term Capital
Direct investment in Canada55521075405045
Canadian direct investment abroad–125–80–25–25–15–15
Transactions in Canadian securities
Special issues sold to U.S. insurance companies135135135
Other new issues58382927639310951
Other transactions and retirements–373–457–87–191–68–111
Transactions in foreign securities–7020323–4–2
Advance debt repayments100
Other loans by Canadian Government (net)21156–817
Other–154–88–4–46–30–8
Total67258437320034–23
C. Total (A plus B)–176631351148–131
D. Private Short-Term Capital (including net errors and omissions)33283–69100–107159
E. Monetary Movements
IMF position377–86–86
Special international financial assistance4
Official gold and foreign exchange (increase—)–537–60–66–111145–28
Total–156–146–66–11159–28
Source: Based on data from the Dominion Bureau of Statistics.

No sign indicates credit; minus sign indicates debit.

Preliminary.

Source: Based on data from the Dominion Bureau of Statistics.

No sign indicates credit; minus sign indicates debit.

Preliminary.

The improvement in the balance of payments on current account coincided with a continued rise in production and income. It was supported by the large bulk sales of wheat to the Soviet Union and several other countries late in 1963, which continued in the first half of 1964, as well as by the lower limits to duty-free purchases abroad by Canadian travelers that were introduced in 1962. The latter, together with the exchange depreciation, helped to change the balance on account of foreign travel from deficit to surplus. The average rate of inflow of foreign long-term capital was almost as high in 1963 as in 1962, a reduction in direct investment being offset by a rise in new issues of Canadian securities in foreign markets, mainly New York. From the first to the second half of 1963, however, there was a substantial reduction in new issues and in the net inflow of long-term capital. This was caused in part by the U.S. proposal of an interest equalization tax, although a considerable decline would have been expected in any event after the extraordinary concentration of new Canadian issues during the first half of 1963, connected with the rebuilding of the depleted reserves after the crisis of 1962. The bill now pending before the U.S. Congress would authorize the President to exempt new Canadian issues (though not outstanding Canadian securities) from the proposed tax, while the Canadian Government in turn has indicated that it does not desire or intend to increase its foreign exchange reserves through the process of borrowing by Canadian residents in the U.S. capital market. The reduction in the net inflow of capital from the first to the second half of 1963 occurred at the same time as the normal seasonal improvement in the current account balance and the additional boost given by the sharp rise in exports to the Soviet Union, so that, after the reduction in the inflow of capital, the over-all balance of payments remained in approximate equilibrium for the remainder of the year.

India

In spite of some improvement in the balance of payments of India during 1963 (Table 29), its external payments position has continued to be under pressure, reliance on external assistance and import restrictions being heavy; and the level of foreign exchange reserves is low. These pressures have reflected primarily the large import demand arising from the development effort; moreover, until recently, exports showed only a small increase. In the past 18 months or so, defense requirements have placed an additional heavy burden on the economy. Nevertheless, this period has witnessed some abatement of the pressure on the payments position. There has been an increase in foreign exchange reserves from the low level to which they had fallen in 1962, and India has also repurchased some of the drawings made from the Fund in 1961 and 1962.

Table 29.India: Balance of Payments Summary, 1960–631(In millions of U.S. dollars)
1960196119621963 2
A. Goods, Services, and Private Transfers
Exports f.o.b.1,3151,3891,4121,625
Imports mainly c.i.f.–2,260–2,140–2,288–2,455
Trade balance–945–751–876–830
Services63–41–71–10
Private transfers368574974
Total–814–735–898–766
B. Private Capital and Net Errors and Omissions88–125–65
C. Official Transfers and Capital
Transfers38135123140
Capital552667608708
Total633702731848
D. Total (A through C)–93–34–14217
E. Monetary Movements
IMF position–6912629–20
Commercial banks26–256
Central institutions
Other liabilities12–74–413
Other assets (increase—)1247117–16
Total9334142–17
Source: Based on data from the Indian authorities.

No sign indicates credit; minus sign indicates debit.

Preliminary.

Grants of U.S. surplus agricultural commodities through private agencies are included with official transfers.

Source: Based on data from the Indian authorities.

No sign indicates credit; minus sign indicates debit.

Preliminary.

Grants of U.S. surplus agricultural commodities through private agencies are included with official transfers.

While severe import cuts and tighter restrictions on payments for services were adopted in the middle of 1962, the principal factors behind the improvement in the payments position have been increases in exports and in receipts of foreign assistance. In the past two or three years, the authorities have made determined efforts to increase exports by a variety of promotional measures. After a decade of virtual stagnation, exports increased by about 15 per cent in 1963; the increase was particularly significant because it was not based on higher prices for exports and it was quite widespread among commodities.

In part because of the improvement in the external payments position, but also because of larger credit extension to both the public and private sectors, the tempo of domestic monetary expansion accelerated in the fiscal year ended March 1964. This, together with a slow growth of aggregate output, and particularly shortfalls in the output of foodgrains, led to considerable pressure on prices. Recently, the authorities have taken some credit control measures to restrain price increases. Also, the budget for the current fiscal year visualizes a deficit considerably smaller than in the last; to help to achieve this objective, new revenue measures have been adopted in addition to the large-scale tax effort of the previous year.

Nigeria

Nigeria’s external payments position continued to be under heavy pressure during 1963. The loss of international assets in that year was higher than in any previous year except 1960, the year of independence. Total official and banking international assets, which had been equivalent to about 14 months’ imports at the beginning of 1960, had declined to the equivalent of only about 5½ months’ imports by the end of 1963, and the decline continued during the early months of 1964.

The large balance of payments deficits during 1960 and 1961 (see Table 30) were caused principally by sharply increased imports, which created record trade deficits during these two years. These were, however, also years of high net capital inflow, both official and private, which partially offset the large current deficits. In 1962 the balance of trade improved somewhat, in spite of lessened exports, because of a sharp decline in imports following tariff measures taken early in that year. At the same time, the net inflow of capital dropped sharply; insofar as private capital was concerned, this reflected at least in part a shift in commercial borrowing from foreign to domestic sources, in keeping with the Government’s policy of fostering domestic credit. The inflow of official capital also slowed in 1962, because foreign assistance for projects included in earlier development efforts tapered off before financing was obtained for new projects under the Six-Year Development Plan which started during 1962.

Table 30.Nigeria: Balance of Payments Summary, 1960–63 1(In millions of U.S. dollars)
1960196119621963 2
A. Goods, Services, and Private Transfers
Exports f.o.b.462479463517
Imports c.i.f.–586–601–557–553
Trade balance–124–122–94–36
Services–65–40–42–57
Private transfers–16–18–9–13
Total–205–180–145–106
B. Private Capital and Net Errors and Omissions
Private Capital53642942
Net errors and omissions123012–27
Total65944115
C. Foreign Aid (net)
Grants1171322
Loans232512–15
Total3432257
D. Total (A through C)–106–54–79–84
E. Government Assets (increase—)
Marketing boards4352–1–11
Local governments and semiofficial bodies34084116
Federal Government73249
Total90634254
F. Monetary Movements (increase—)
Commercial banks (net)41–2420–4
Central bank–25151734
Total16–93730
Source: Based on data from the Central Bank of Nigeria.

No sign indicates credit; minus sign indicates debit.

Preliminary.

Principally municipalities and regional and local governments.

Source: Based on data from the Central Bank of Nigeria.

No sign indicates credit; minus sign indicates debit.

Preliminary.

Principally municipalities and regional and local governments.

In 1963, export earnings, which had remained fairly stable during the preceding four years, increased substantially, owing mainly to increased exports of groundnuts, palm products, and petroleum, but also to higher prices for some agricultural commodities. Since imports remained virtually unchanged, the trade deficit was reduced quite sharply. However, the net deficit on services account increased, principally as the result of increased transfers of direct investment income abroad and of reduced earnings on foreign assets as international reserves declined. The net inflow of foreign capital was even lower than in 1962, a somewhat increased net inflow of private capital (which, however, remained well below the high levels of 1959-61) coinciding with large official debt repayments.

During all this period, the Federal and Regional Governments have experienced large over-all budgetary deficits associated primarily with the financing of capital expenditures for development. These have been met mostly by drawing down external balances and assets held by these Governments and, more recently, by domestic bond issues, which have been largely taken up by the Central Bank. There has also been a substantial expansion of banking credit to the private sector, partly connected with the credit policy mentioned earlier. The domestic effects of these developments have, however, been largely offset so far by the balance of payments deficit, and prices have risen only moderately. Nigeria’s external trade and payments have remained broadly free from restrictions during this period.

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