Ch04

1. Crop and livestock production in 1994
2. Food shortages and emergencies
3. Current cereal supply, utilization and stocks
4. External assistance to agriculture
5. Food aid flows in 1994/95
6. International agricultural prices
7. Fisheries: catch disposition and trade
8. Forestry production and trade

1. Crop and livestock production in 1994

Globally, 1994 was yet another lacklustre year for food and agricultural production, as world crop and livestock output increased by only 1.8 percent having stagnated the previous year.
Crop and livestock production in the developed countries expanded marginally by an estimated 0.3 percent, following a 3.8 percent contraction in 1993. In the developing countries as a group, production is estimated to have increased by 2.8 percent, slightly above the expansion rate of the preceding year.
The single most important factor contributing to the global increase in agricultural production in 1994 was the spectacular recovery in production in the United States, following the sharply reduced 1993 harvests. Close to ideal growing conditions led to unusually high yields for major crops. This, together with the highest ever livestock production, led to an expansion in agricultural production of no less than 16 percent.
In Central and Eastern Europe and the former USSR, agricultural production contracted by as much as 16 percent in 1994 following several years of decline. Most of the contraction occurred in the area of the former USSR. In Central and Eastern Europe, agricultural production declined by an estimated 7 percent, mainly as a result of drought-reduced crops in Poland which more than offset expansions in other major producers such as Hungary and Romania.
Among the other developed country regions, production declined substantially in Australia and more moderately in the EC.
The 2.8 percent increase in developing country crop and livestock production implied a 0.9 percent increase in per caput terms. This is a meagre gain compared with average annual production increases of 3.3 percent during the 1980s and of 3.2 percent from 1990 to 1993. Furthermore, performances varied significantly among the developing country regions with only Latin America and the Caribbean and the Far East recording increases above the rate of population growth.
The strong production growth achieved by Latin America and the Caribbean represented a recovery from the severe setback of 1993, which itself followed several years of mediocre performance. The expansion in 1994 is largely accounted for by significant increases in Argentina and Brazil, while only a modest increase is estimated for Mexico and a contraction for Colombia.
In the Far East, production growth decelerated in 1994 although it remained well above the rate of population growth. The People's Republic of China maintained robust agricultural growth, but unfavourable weather held back agricultural output and the rate of expansion fell below the average of the preceding five years. India experienced a relatively favourable agricultural year with production growth accelerating after a somewhat sluggish 1993.
At 1.9 percent, the increase in crop and livestock production in the Near East and North Africa is an improvement over the performance of 1993, but still implies a further decline in per caput production. The growth in production in the region is largely attributable to an estimated 35 percent increase in Morocco, where production recovered after two years of sharply drought-reduced levels. In Egypt, production in 1994 is estimated to have declined by 2-3 percent, following five years of sustained increases in per caput production. The 1 percent decline estimated for Turkey marks the fourth consecutive year of declining per caput production.
Sub-Saharan Africa experienced yet another poor agricultural year, as crop and livestock production increased by only an estimated 2 percent. Thus, after a temporary halt in 1993, the region returned to the path of declining per caput agricultural production which commenced in the early 1970s. Among the larger producing countries, relatively positive performances were recorded by Nigeria, which has seen continuous gains in per caput production levels since 1988, and Kenya, although its 7.5 percent increase represented only a partial recovery from the devastations caused by drought in both 1992 and 1993. A decline in production is estimated for Zaire and only a marginal increase is expected in the United Republic of Tanzania.

Exhibit 1

2. Food shortages and emergencies

Africa, where 15 countries currently require exceptional and/or emergency food assistance, remains the continent most seriously affected by food shortages.
A massive cereal deficit for 1995/96 is forecast for southern Africa reflecting drought-reduced harvests in many countries. Rains in Botswana, Lesotho, Namibia, South Africa, parts of Swaziland, Zambia and Zimbabwe have been poor and national crops will be well below average. Southern parts of Malawi and Mozambique have also been affected by drought. The subregion's import requirements are set to rise dramatically in 1995/96 and local emergency interventions will be necessary for drought victims. Angola will remain heavily dependent on relief assistance in 1995/96, in spite of some improvements in the security conditions and a marginal increase in 1995 production.
In spite of some good harvests, large-scale emergency assistance will be needed in eastern Africa throughout 1995. Food production in Burundi and Rwanda has failed to recover fully, although there have been some good rains for the 1995 first season crops and increased distribution of farm inputs. In Rwanda, following favourable weather conditions and timely provisions of agricultural inputs, the 1995 second season harvest increased substantially from the previous year, but remained well below average as a result of reduced plantings. In Burundi, the harvest outcome is likely to be compromised by renewed outbreaks of hostilities and a tense security situation in many areas. Large numbers of internally displaced and vulnerable persons in both countries continue to require emergency food assistance. Civil strife in the southern Sudan continues to hamper relief activities, while the departure of the United Nations Operation in Somalia (UNOSOM) from Somalia raises the likelihood of renewed food problems being caused by a deteriorated security situation. Localized droughts in Ethiopia and Uganda have necessitated emergency food interventions. Food distribution will still be required in 1995 to cover the needs of the most vulnerable people in Eritrea.
Overall the food supply situation is satisfactory in western and central Africa, reflecting above-average to record harvests in most countries. However, food production and distribution in Liberia and Sierra Leone continue to be hampered by civil strife. Desert locusts may also develop in northwestern Africa from infestations at present in Mauritania. In central Africa, the food supply position remains tight in the urban areas of Zaire as a result of economic instability, high inflation and a tense political situation.
Elsewhere the continuing factional fighting in Afghanistan has caused further displacement of people who, together with destitutes and returnees, will continue to be in need of international food aid in the months ahead. In Iraq, the food and nutritional situation remains grave, mainly as a result of the difficulties encountered by the government in financing imports. A recent UN Consolidated Interagency Humanitarian Programme for 1995-96 stresses that the country's needs are enormous and cannot be met solely through humanitarian assistance programmes.
In Cambodia, large numbers of vulnerable people are at risk of starvation in the areas worst affected by drought and floods in 1994. In Mongolia, after a poor 1994 harvest, the already tight food supply situation is expected to aggravate further until the next harvest in September. In Nepal, serious food supply difficulties are reported from the areas hit by drought in 1994.
In Haiti, the food supply situation is improving, but economic assistance is needed for the supply of coarse grain, bean seeds and other farm inputs for the planting of the second season crop.
In Bosnia and Herzegovina, in the embattled area of Bihac the entire population is severely affected by shortages of food and relief assistance is critically needed. In Sarajevo deliveries of food aid are extremely difficult and food market prices are too high for a large part of the population.
In Armenia, the food supply situation and living conditions of the urban population have eased somewhat during the past year but remain difficult. In Azerbaijan and Georgia, foreign exchange constraints and disruption to trade as a result of the conflict in Chechenya have limited food imports.
In Moldova, the tight grain supply situation caused by last year's poor harvest has eased, but vulnerable groups are still in need of food assistance.
In Tajikistan, the grain supply situation is extremely tight; domestic grain production is small and lack of foreign exchange or barterable goods severely constrains imports. In Kyrgyzstan, budgetary constraints will necessitate substantial quantities of food aid.

Exhibit 2

3. Current cereal supply, utilization and stocks

World cereal production in 1994 is estimated to be over 1 953 million tonnes, 3 percent higher than the reduced harvest of 1993 and above the average of the last five years. Most of this increase, however, reflects a strong recovery in coarse grain production, especially in the United States. Rice output also rebounded strongly in 1994 whereas wheat production fell significantly, mainly as a result of reduced production in the developed countries, especially Australia and the Commonwealth of Independent States (CIS).
Global cereal stocks for crop years ending in 1995 are forecast to decline, for the second consecutive year, to 311 million tonnes. At this level, total cereal stocks would be only 17 percent of trend utilization; i.e. at the lower end of the range the FAO Secretariat considers the minimum necessary to safeguard world food security. The largest decline is expected for wheat, especially wheat inventories held by major exporters. Rice stocks are also forecast to contract, although mainly in the developing countries, as global production growth fails to keep pace with consumption requirements. By contrast, coarse grain carryovers are anticipated to recover from their low opening levels, as a result of higher production in the United States.
Early production prospects for 1995 point to some recovery in wheat, but to a reduction in coarse grain production. Wheat output is currently forecast to increase by around 4 percent to 550 million tonnes, with most of the increase coming from the developed countries, especially Australia and the EC. Total wheat output is also forecast to rise in the developing countries, with most of the increase expected to come from Asia. In Africa, on the other hand, wheat production is forecast to be smaller this year, mainly because of the drought in Morocco. Early prospects for world coarse grain production in 1995 point to a 5 percent fall to around 840 million tonnes. Most of the decline is expected in the developed countries (especially the United States, the CIS and South Africa), while in the developing countries total coarse grain production is forecast to increase, slightly exceeding last year's above-average crop.
The 1995/96 supply and demand situation, even if there is another good paddy crop, implies that world cereal supplies will tighten further, so that the stock to utilization ratio could fall even lower than the minimum safety range. Both wheat and coarse grain stocks are forecast to be drawn down further, even though world utilization is expected to remain below trend and largely unchanged from 1994/95. The situation might prove even more delicate as wheat carryovers are projected to fall to around 106 mill ion tonnes, the lowest volume since the beginning of the 1980s.

Exhibit 3

4. External assistance to agriculture

Over recent years, external assistance to agriculture has tended to decline both as a share of total official development assistance and in absolute terms. Measured in constant 1990 prices, commitments to agriculture declined from US$12 700 million in 1990 to $9 882 million in 1993 (excluding commitments from the United States for 1993; these commitments had been $506 million in 1992). The decline was far more pronounced for multilateral than for bilateral assistance. Indeed, multilateral assistance dropped in constant prices from $8 071 million in 1990 to an estimated $5 716 million in 1993, mainly as the result of close to a halving of commitments from the International Development Association (IDA), the soft-lending branch of the World Bank, and a reduction by almost two-thirds in commitments from the regional development banks.
Preliminary data for 1994 point to a further decline in multilateral commitments, to $5 716 million in 1990 prices, mainly accounted for by lower commitments from the regional development banks. World Bank commitments are expected to increase slightly, thanks to a partial recovery in IDA commitments from the sharp reduction of the previous year.
The declining trend in external assistance to agriculture is a major source of concern, occurring at a time when many low-income agriculture-dependent countries are facing increasing difficulties in exploiting the potential of their agriculture as a support of overall development, poverty reduction and food security.

Exhibit 4

5. Food aid flows in 1994/95

Shipments of food aid in cereals during 1994/95 (July/June) are estimated to be 9.8 million tonnes. This is 20 percent below the previous year's level of 12.6 million tonnes and 35 percent below the 1992/93 level of 15.1 million tonnes, mainly because of the reduced level of donor budgetary allocations. One early indication that this trend may continue is that, under the new Food Aid Convention that was expected to come into effect on 30 June 1995, the total minimum cereal aid commitment has been drastically reduced from 7.5 to 5.4 million tonnes.
Although the composition of low-income food-deficit countries (LlFDCs) has changed to include 12 new countries of Central and Eastern Europe and the former USSR, sub-Saharan Africa still continues to be the major recipient of food aid in cereals and accounts for more than 40 percent of total shipments to LlFDCs.
In addition to cereal commodities, donors are providing ever-increasing quantities of non-cereal commodities, comprising mainly vegetable oil, pulses, dairy products, meat and fish and other high-value commodities. In 1993,1.9 million tonnes of these commodities were shipped and, in 1994, 1.6 million tonnes.
As of March 1995 pledges to the 1995 International Emergency Food Reserve (IEFR) amounted to 280 288 tonnes of food commodities. For 1994, IEFR pledges amounted to 1 185 733 tonnes of food commodities, of which 927 639 tonnes were cereals and 258 094 tonnes other foodstuffs.
In addition to IEFR contributions, by the first quarter of 1995 a total of 260 196 tonnes of cereal and non-cereal commodities had been pledged under the subset of World Food Programme (WFP) regular resources to meet the requirements of protracted refugee operations (PROs). The level of pledges to PROs in 1994 amounted to 691 976 tonnes of cereals and 89 142 tonnes of other commodities.
As of March 1995 total pledges by 30 donors to WFP's regular resources for the biennium 1995-96 stood at US$288.8 million, representing 19 percent of the pledging target of $1.5 billion. Of the total amount pledged, $181.7 million was in the form of commodities and $107.1 million in the form of cash. In the previous biennium, 1993-94, pledges by 61 donors reached $988 million, representing nearly 66 percent of the pledging target of $1.5 billion. Of the total amount pledged $641.4 million were in the form of commodities and $346.6 million in the form of cash.

Exhibit 5

6. International agricultural prices

Confirming the tightening wheat market situation, wheat export prices have risen considerably in 1994-95. Maize export prices also strengthened during the first months of 1995, mainly reflecting adverse weather conditions for planting in North America. International rice prices were relatively weak in the second half of 1994 but recovered in early 1995 because of the large increase in import demand from Bangladesh, China and Indonesia. Among the different types of rice, the prices of lower qualities rose the most, boosted in part by the absence of China, which is normally a regular supplier of such rice, in the international market and by reduced supplies from Pakistan and Viet Nam.
Prices of oils and fats had risen to record levels by the end of 1994 as a result of tightness of supplies. They remained high through March 1995 but, under the influence of abundant crop supplies and a substantial replenishment of world stocks, a downward movement started in April 1995 and could continue until the end of the season. The supply of oilcakes and oilmeals far exceeded demand and their prices decreased sharply after October 1994. The FAO index of international market prices for these products during the October 1994 to May 1995 period was 7 percent below the 1990-94 five-year average.
Tighter world sugar supplies in 1994, which were at their lowest level in six years, caused sugar prices (International Sugar Organization [ISO] daily price) to rise sharply during the year. The price reached its five-year high during the first quarter of 1995. Prices subsequently weakened as a result of improved production in a number of key countries and forecasts of substantially larger crops in 1995/96.
In 1994 prices in the world coffee market were volatile as a result of tight supplies, frost damage in Brazil and speculation activity. Prices rose sharply in September 1994, reaching more than three times the average level of 1993, and then fell to about US$3 000 per tonne by the end of the year. Prices remained around $3 200 to $3 500 per tonne during the first four months of 1995 reflecting stable market conditions.
after significant increases in 1994, in the first four months of 1995 cocoa prices remained at their highest level for five years. The high prices reflected a tight market situation resulting from world consumption exceeding production over the 1992/93 to 1994/95 period. However, following indications late in the season that the 1994/95 supply deficit was less than anticipated as a result of higher production from the Côte d'lvoire and Ghana, prices declined in May 1995.
World tea prices declined further in 1994 from the depressed level of 1993, and this trend continued for the first four months of 1995. The prolonged situation of depressed prices reflected an imbalance of the world tea market with the growth of export supplies surpassing that of import demand.
World cotton prices reached record high levels in early 1995. In the face of strengthened demand, coupled with production shortfalls in many countries, stocks were drawn down markedly in 1994 and into 1995. As a consequence, prices in April 1995 were pushed to around 20 percent above those prevailing at the beginning of the year and 35 percent above those of April 1994.

Exhibit 6

7. Fisheries: catch disposition and trade

In 1993 the world catch and culture of fish and shellfish reached about 101.4 million tonnes, from 98.8 million tonnes in 1992. In recent years both marine and freshwater capture fisheries have slightly declined, while aquaculture production has increased, reaching 15.9 million tonnes (excluding plants) in 1993.
Among major producers China and Peru expanded production significantly in 1993, while decreases were recorded for Chile and the Russian Federation.
The increases in marine catches have come, since 1983, primarily from four shoaling pelagic species and Alaska pollack. Catches of cods, hakes and haddocks have been in steady decline, with the exception of increased haddock catches in the northeast Atlantic after 1991.
Many heavily fished stocks require urgent rehabilitation and action towards this end will involve reductions in fishing effort. A number of states have already addressed the problem of overcapacity in fishing fleets by initiating the scrapping or decommissioning programmes. To rebuild stocks effectively and to increase yields in the longer term reductions in fishing effort will mean reductions in world landings in the short to medium term.
The steady increase in inland fisheries appeared to peak in 1990 at approximately 6.5 million tonnes and subsequently stabilized at a slightly lower level. In 1992 Asia produced 54 percent of the world inland catch and Africa contributed 25 percent. Nearly all inland resources show symptoms of excessive exploitation.
Aquaculture production from inland waters (9 million tonnes in 1992) is higher than aquaculture production in marine waters (4.9 million tonnes in 1992) but rapid increases (recently of about 2 million tonnes annually) are recorded for both. The bulk of production is from developing states - Asia is by far the main contributor with 84 percent of world aquaculture production in 1992.
Estimates of the disposition of world catch in 1993 indicate an increase of 1.7 percent in fish used for human consumption to 72.4 million tonnes.
International trade in fishery products increased by 1.8 percent between 1993 and 1992, with the total value of exports exceeding US$41 billion. The share of developing countries in world exports of fishery products increased by 8.4 percent to $21 billion.
Developing country exports in 1993 represented 32.6 percent of their total catch as compared with 55.6 percent for developed countries. In spite of this, developing countries as a group recorded an increasingly positive trade balance in fishery products, which reached $13.4 billion in 1993.
Thailand became the main fish exporter in the world, overtaking the United States. Total Thai exports were $3.4 billion in 1993, an 11 percent increase over 1992. Japan maintained its position as top importer; in 1993 it imported some $14.2 billion, which accounted for 32 percent of world fish imports in value terms.

Exhibit 7

8. Forestry production and trade

World roundwood production expanded considerably in 1994 to reach 3 460 million m³. However, this was still below the peak level of 1990 because of continued depressed production in the countries of Central and Eastern Europe and the former USSR. Output of industrial roundwood recovered notably in the Organisation for Economic Co-operation and Developement (OECD) countries and continued to grow in the developing countries. In 1994, world production of industrial roundwood was an estimated 1 555 million m³ - 6 percent below 1990 levels. Production of fuelwood continued to grow in the developing countries, where it constitutes 80 percent of roundwood production, reflecting increased demographic pressures and the continuing dependence of rural communities on wood as a main source of energy.
North American roundwood markets had witnessed a price explosion in 1993 which was caused particularly by logging restrictions in the Pacific Northwest of the United States. Prices returned to more normal levels as a United States federal court, in mid-1994, temporarily lifted the logging ban in the protected federal public forests of the Pacific Northwest. Tropical log supply was affected by several environmental and sustainable management restrictions introduced by major Asian producers. These measures continued to have an upward effect on prices of all tropical timber products. Several consuming countries have started to substitute temperate timber for tropical timber, thus favouring exports from temperate countries, such as Chile and New Zealand, over exports from the large Asian market.
Production of wood pulp in 1994 recovered strongly as the demand of the paper industry was stimulated by booming markets in the EC and North America. Trade and prices of pulpwood and wood chips increased markedly from the low levels of 1993.
World production of sawnwood recovered slightly in 1994 from the low 1993 levels with increases in North America, the EC and Scandinavian countries. Prices of coniferous sawnwood, although levelling off from the peak reached in 1993, remained high. Countries in Central and Eastern Europe and the former USSR, with the exception of the Baltic states, continued to suffer from dramatic output drops. The Russian Federation recorded a further fall in output of coniferous sawnwood that was estimated at 9 million m³ or 35 percent below the already low 1993 level.
Production of tropical sawnwood in 1994 continued its slow growth, with a higher share being utilized domestically within producing countries, thus reflecting the trend towards increasing internal manufacture of further processed products.
World production of wood-based panels grew a further 4 percent in 1994. Growth was more sustained in tropical developing countries where plywood production has enjoyed a very fast growth in the last decade thanks to the export-driven expansion of dynamic industries in Southeast Asian countries such as Indonesia and Malaysia.
World production of paper and paperboard grew by a further 5 percent in 1994, continuing a decade-long ascending trend of the industry. Significant increases in output were recorded for the EC (8.5 percent), North America (4.5 percent) and the countries of Southeast Asia, while production continued to drop in the former USSR countries and in some Eastern European countries. The demand for certain paper grades was so tight that prices, after the severe declines of 1993, reached unprecedented levels.
World production of wood pulp recovered markedly in 1994 by 5 percent, after five years of stagnation. This was mainly the result of the tightness of waste paper supplies which led the price of waste paper to increase fivefold in 1994. Environmental constraints in the developed countries severely limited the expansion of the present wood pulp capacity. As a result prices of wood pulp started to move up very sharply in the last part of 1994, returning to the former record levels of 1990, while international stocks of wood pulp diminished sharply.
The value of world trade in forest products, after the decline of 1993, expanded in 1994 by an estimated 5 percent, reflecting the strong recovery of pulp and paper export prices and a generalized increase in export volumes. In addition, international export prices for logs, sawnwood and wood-based panels remained high. The volume of world trade expanded for all forest products with the exception of the log and tropical sawnwood trades.

Exhibit 8A

Exhibit 8B

II. Overall economic environment and agriculture

Agricultural outlook
Outlook for developing country economies highly dependent on agricultural trade

WORLD ECONOMIC ENVIRONMENT

The year 1994 and the first half of 1995 have seen a gradual acceleration of world economic activity, with an increasing number of countries improving their economic performance. According to IMF, the growth in global output in 1994, at 3.7 percent, was the highest so far for the decade and current forecasts point to a slight acceleration of world economic growth to about 3.8 percent in 1995. The growth in the volume of world trade is also estimated to have accelerated, from about 4 percent in 1993 to 9.4 percent in 1994, and is forecast to expand by a further 8 percent in 1995.'

In the industrialized economies, the revival in growth took place in the context of low, although in some countries rising, inflation and generally prudent fiscal and monetary policies. Fiscal consolidation has remained high on these countries' policy agendas and interest rates have tended to rise as concerns shifted from economic recession to a possible resurgence of inflation. The recovery now under way has resulted in some reduction in unemployment rates, but these remain very high in some countries.

The transition economies in Central and Eastern Europe and the former USSR showed contrasting performances. Poland, Hungary, the Czech Republic and Slovakia - where the institutional and structural reforms are already well advanced - all showed positive growth rates in 1994 and, except for Hungary, are expected to accelerate the rate of economic expansion further in 1995. The economic recession also appears to have bottomed out in the Baltic states. On the other hand, the Russian Federation and most states in the former USSR faced further sizeable declines in economic activity during 1994 and 1995 (see Regional review of Central and Eastern Europe, p. 165).

Figure 1

Economic activity has remained dynamic overall in the developing countries, with GDP growth exceeding 6 percent in 1994 and forecast to continue expanding at a slightly lower rate in 1995. The favourable economic outlook reflected a combination of external and domestic developments. External factors included the strengthening and spread of the recovery in the developed economies boosting trade and investment flows; the gains, albeit slow and uneven, in trade liberalization, along with the acceleration of regional integration (discussed in Part 111, p. 199); the strengthening of international market prices of several major traded commodities; and large capital inflows which, although slowing in the wake of the Mexican crisis, appear to have resumed as the confidence of financial markets is being restored.

Domestic factors that contributed to the improved economic outlook for developing countries included further progress in market-oriented economic reform; successful stabilization in many countries, shown by widespread - and in some cases dramatic reductions in inflation rates; and greater political and social stability in some countries and areas formerly affected by civil strife and armed confrontation.

Economic performances varied widely across the different countries and regions, however, as did the relative importance of the various domestic and external factors underlying them (see Regional review, developing country regions, p. 75).

As regards the economic outlook, Project LINK projections for 199698 point to annual growth rates of about 2.6 percent in the

Figure 2

BOX 1
EXTERNAL DEBT SITUATION OF DEVELOPING COUNTRIES

External indebtedness continued to be a major problem for many developing countries in spite of improvements in some crucial indicators of debt servicing and net transfers, and progress in debt restructuring and reduction.

The total developing country external debt stock, which at the end of 1993 reached US$1 812 billion, was estimated to be $1 945 billion at the end of 1994, up by 7 percent in nominal terms. The share of developing country long-term debt held by official creditors - bilateral lenders and multilateral institutions - continued to rise and was expected to account for 51 percent of total developing country long-term debt by the end of 1994, compared with a share in 1982 of only 35 percent.

The increase in debt stock is explained by: i) substantially higher total net flows on debt, estimated at US$108 billion in 1994, mainly in countries that have not rescheduled their debts and in some Latin American countries that have overcome their commercial debt problems; ii) the cross-currency valuation effect calculated on long-term debt and IMF credit increased the debt stock by a projected $25 billion; iii) rescheduled interest will add another $20 billion. On the other hand, officially supported debt and debt service reduction operations, market buy-backs and debt-equity swaps, as well as debt forgiveness (especially in support of the devaluation of the CFA franc) were expected to reduce the debt stock by almost $12 billion. Furthermore, accumulated interest arrears were expected to fall by over $8 billion as a result of the conclusion of restructuring arrangements.

External long-term debt to agriculture (broadly defined), of which 91 percent is owed to official bilateral and multilateral creditors, reached almost US$75 billion in 1993.

The estimated total debt service payments on all debts in 1994, at US$199 billion, represented an increase of 4 percent in nominal terms over 1993. The total debt service to export ratio, which in 1993 rose to 18 percent, reversing the downward trend of the previous few years, was expected to improve in 1994 by declining to 17 percent. The debt to GNP ratio, which has increased steadily during the 1990s, was estimated to reach almost 41 percent in 1994, the highest level since 1987.

Net transfers on total debt (i.e. disbursements minus total debt service payments), which had been negative since 1983, implying an outflow of resources from developing countries, turned positive in 1992. This reversal consolidated more recently as transfers to developing countries of almost US$29 billion and $25 billion were estimated in 1993 and 1994 respectively. The situation differed in the two more indebted regions, however. For Latin America and the Caribbean, after a positive net transfer on debt of almost $5 billion in 1993, a negative transfer of $10 billion was estimated for 1994. By contrast, in 1994 sub-Saharan Africa was estimated to have a positive net transfer, amounting to $2 billion, for the first time since 1980.

Aggregate net resource flows (which include other forms of external financing besides debt-related flows) to all developing countries, after declining for several years up to 1987, have increased every year since, both in real and nominal terms, reaching US$213 billion in 1993 and an estimated $227 billion in 1994. A striking feature is the surge in private flows, which in the 1990s have become the most important component of aggregate net long-term resource flows to developing countries. These increased from $159 billion in 1993 to an estimated $193 billion in 1994. In 1993 private flows, mainly portfolio equity investment, foreign direct investment and debt creating flows, accounted for 75 percent of the total net aggregate long-term resource flows against 44 percent in 1990. However, it is a small group of countries, mainly middle-income East Asian and Latin American, that have expanded their access to private capital flows. In absolute terms the People's Republic of China and Mexico have been the largest beneficiaries. Although almost 30 percent of net long-term private flows are debt-creating they are not due to commercial banks as they were in the 1970s, but are in the form of bonds issued by a limited number of countries that have gained the necessary creditworthiness. developed countries (accelerating in Japan and Europe and slowing in the United States); 4.5 percent in the transition economies of Europe; 3 percent in the CIS, where a return to positive growth is expected from 1996; and 5.6 percent in the developing countries.

World economic growth is expected to be driven to a large extent by dynamic trade. World merchandise exports are forecast to expand by about 10 percent per year (7.5 percent at constant prices) with the developing countries, including those of South and East Asia, showing the fastest growth in both exports and imports. Some improvement is expected in the developing countries' trade balances, more markedly those of Latin America and the Caribbean.

A less polarized regional pattern of economic performance is expected to emerge in 1996-98, with the fastest growing economies (South and East Asia and China) moderating their rate of expansion and the low-growth ones (mainly in Africa) accelerating theirs. Nevertheless, the gap between fast- and slow-growing economies is expected to remain wide. Those economies better integrated into the world economy should be better able to benefit from the overall expansion of trade and financial flows. Conversely the poorest countries, which also tend to be those less integrated and less exposed to external competition, would benefit less from the improved environment. Another factor influencing performance differential across regions is likely to be the direction of their trade links. In particular, Asia and Africa would benefit relatively more from the rising economic dynamism of Japan and Europe, their main trading counterparts, while the slower growth in the United States would negatively affect Latin America and the Caribbean.

A factor of considerable importance for the economic prospects of the developing countries will be the future course of commodity prices. The strengthening in prices of many agricultural commodities in 1994 and 1995 has resulted in large windfall gains to many developing countries. However, the longer-term outlook is for a gradual weakening of these prices. Their surge was caused by various factors of which only one the recovery in the industrialized countries - may be expected to continue exerting a positive influence. The other factors that played a greater role in the price surge, however, were transient in nature: production shortfalls caused by bad weather coinciding with low levels of stocks and supply adjustments to earlier poor market conditions. The World Bank projections (incorporated as basic assumptions in Project LINK forecasts) point to a 2.5 percent yearly decline in the prices of agricultural commodities and a 5-6 percent yearly decline in those of beverages between 1996 and 2004. Only timber is expected to appreciate, by about 2 percent a year.

Figure 3

Agricultural outlook

Figure 4 summarizes Project LINK forecasts for overall and agricultural output, exports and imports. Noteworthy features include:

Prospects for overall economic and agricultural growth appear significantly brighter than were forecast last year. This is true for the developing countries as a whole and, to varying degrees, all individual regions.
The expected growth in agricultural output is forecast to be significantly higher than the average of the 1980s. For the developing countries as a whole, the average yearly growth in agricultural GDP in 1994-98 is forecast at 5.7 percent, compared with 3.7 percent during the 1980s. The comparable figures for the two periods are 2.2 and 1.2 percent for sub-Saharan Africa; and 3.8 and 2.3 percent for Latin America and the Caribbean. In Asia and the Pacific agricultural GDP should expand at approximately the same pace as it did in the previous decade, while in the Near East and North Africa region some slowdown is expected.
In general, agriculture is forecast to expand at a slower pace than other sectors - this is as expected given the generally low responsiveness of agricultural demand to changes in income. The contribution of agriculture to overall growth is expected to vary, generally reflecting the relative importance of agriculture in the different regions' economies. Nevertheless, it is in Asia and the Pacific, the region with the highest agricultural share of output, that the greatest gap is expected between GDP and agricultural GDP growth rates. Such expectations are in line with past trends characterized by a rapid process of industrialization in the region.
In spite of its significantly lower dynamism compared with other sectors, agricultural GDP growth in Asia and the Pacific is still forecast to be the highest among the developing country regions. Again, this would be a continuation of past trends as would be, on the opposite side, the lowest regional growth rates forecast for sub-Saharan Africa. For Latin America and the Caribbean the projected levels of agricultural GDP growth in 199598 would represent a vast improvement over the mediocre performances of the 1980s and 1990s.
Forecasts for total and agricultural trade in the developing country regions are summarized in Figure 5. The general picture is one of a strong increase in total exports in 1994 and 1995, spearheaded by booming agricultural exports; a sharp deceleration in the growth of agricultural exports in the following years, but still with a strong expansion of total exports; and a much lower expansion of total and agricultural imports, enabling sizeable improvements in trade balances. These general expectations are examined in the following section focusing on those countries for which agricultural trade matters most.

Figure 4

Contents - Previous - Next