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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Introduction

For a long time commodity prices have been a source of considerable interest among academic researchers; they are a major cause of concern for policymakers and a harsh reality in the lives of poor people in countries which rely predominantly on primary production and exports. Primary commodity prices are not only associated with violent fluctuations, but have also exhibited a long-run declining trend relative to manufactured goods. When the issue of declining terms of trade for primary commodities was first catapulted into prominence (Prebisch, 1950; Singer, 1950), concerns were expressed that it would lead to unequal distribution of gains from trade between the primary producing developing countries and the developed economy suppliers of manufactured goods.

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