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Dip in capital inflows to developing countries: report

Dec 21, 2012

In South Asia the trend was in the opposite direction, with the net inflow in 2011 double that of 2010 on account of the rapid rise in net inflow to India to $22 billion.

Net external debt inflows and aggregate net capital inflows to developing countries fell in 2011, driven by a sharp contraction in net inflows from official creditors and a collapse of portfolio equity flows, the World Bank reported yesterday.

Net external debt inflows to developing countries fell 9 percent in 2011 to 465 billion dollars due to the sharp contraction in inflows from official creditors, which fell to 30 billion dollars from 73 billion dollars in 2010.

According to the report at $434 billion, net inflows from private creditors were almost identical to their 2010 level, but with an important shift in composition: net short-term debt inflows contracted by 27 percent, while medium- and long–term financing from commercial banks tripled to $110 billion.

“These international debt statistics are a vital input for experts working to improve the management of capital flows around the world and having the data open to all is a welcome development,” says Ibrahim Levent, Senior Information Officer in the Bank’s Data Group and part of the team that produced the report.

Aggregate net capital inflows, which tally both debt and equity, also fell 9 percent in 2011 to 1,107 billion dollars, compared with 1,211 billion dollars in 2010. The downturn was due to the collapse in portfolio equity flows, which fell to 2 billion dollars, in contrast to an inflow of 120 billion dollars in 2010.

The decreases were partially offset by inflows from commercial banks, sustained access to international bond markets and a rise in foreign direct investment, the Washington-based global lender said.

The report also highlights a wide disparity in trend among the top 10 borrowers in 2011 ranging from a 29 percent increase in net inflows to India as compared to a 67 percent decline in those to Turkey.

According to the report, in South Asia the trend was in the opposite direction, with the net inflow in 2011 double that of 2010 on account of the rapid rise in net inflow to India to $22 billion ($10 billion in 2010).

It also reported that China received 27 percent of net debt and 35 percent of net equity flows to all developing countries in 2011.

When China is excluded, net external debt inflows and aggregate net capital inflows to developing countries fall 13 percent and 3 percent respectively in 2011, compared with 2010, according to the report.

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