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Discuss five causes of unfavourable balance of payment for most developing countries

Discuss five causes of unfavourable balance of payment for most developing countries

Answers

Davis
i) (reliance on) primary products /raw materials /agricultural produce for export /most developing
countries (mainly) export primary / agricultural products which fetch low prices in the international
market /lower their export receipts
(ii) Heavy /high importation of finished) goods /most developing countries heavily /highly import (finished
manufactured) goods whose values are very high /spend more on them
(iii) (low levels of technology most developing countries rely on low levels of technology on production
which) lower /poor quality of their export hence lowering their value /demand /receipts
(iv) (too much reliance on) foreign borrowing /aid /borrowing yet such loans are repaid with interest (v) (susceptility to ) /natural calamities /many developing countries are easily affected by natural disasters
/drought which adversely affect their production
(vi)high demand /preference towards foreign goods /imports most consumers in developing countries (in
belief that they are of better quality) hence end up spending more on them
(vii) unfavourable world economic order/policies /low bargaining power /the developing countries have very
little say in international trade forums / cannot influence the world economic order in their favour hence
end earning less on exports /spending more on imports
(viii) low /poor foreign investment in the country /inability to attract foreign investment leading to low
capital inflows /low foreign recepts
(ix) decrease in demand for exports hence lowering the countries earning
(x) low production /output of export goods /services /low volume of exports leading to lower export earnings
(xi) devaluation /depreciation of foreign currencies which encourages less export earnings
(xii) appreciation /revaluation of local currency which leads to lower export earnings
(xiii) political instability/insecurity which may interfere /lower export earnings
(xiv) restrictive/protectionism policies by other country that lead to fewer / exports earnings
(xv) withdrawal of foreign aid /grants leading to capital flight /outflows
(xvi) poor governance /policies /corrupt practices leading to low export earnings /low capital outflows
(xvii) unfavourable terms of trade leading to low export earnings /high expenditure on imports
Githiari answered the question on September 23, 2017 at 10:16

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