1887

Commodity Prices, Aid and Debt

Implications for LDCs, Small Vulnerable States and HIPCs

image of Commodity Prices, Aid and Debt

This study reveals the extent of persistent downward trends in commodity prices on least developed countries (LDCs), small vulnerable states (SVSs) and heavily indebted countries (HIPCs) and proposes a Joint Diversification Scheme exclusively for export diversification schemes in the commoditydependent poor countries. The report also proposes and outlines the establishment of a Joint Diversification Fund, in addition to regular aid flows as a longterm solution.

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Instruments for Addressing Commodity Price Behaviour

While volatility in commodity prices triggers the problem of export earnings instability, the long-term trend decline in relative prices has caused sustained foreign exchange losses for commodity-dependent LDCs, SVSs and HIPCs. A number of initiatives have been taken at international level either to ensure price stability in commodity markets or to help producing countries maintain export earnings stability. The basic objective of this chapter is to provide a brief review of the instruments employed to intervene in commodity markets, as well as of other support mechanisms which deal with export shocks in poor countries, and to examine whether they are useful in dealing with the secular decline in the relative prices of primary commodities.

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