World Bank Global Development Finance 2006

World Bank Global Development Finance 2006

Published Jan 2006

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Overview of financial progress in the developing world

Main points from the overview are:

  • 2005 was a landmark year in global development finance, in both the official and private spheres
  • International private capital flows to developing countries reached a record net level of $491 billion
  • a wave ofprivatizations and cross-border mergers and acquisitions drew substantial foreign direct investment (FDI)
  • Capital flows between developing countries (so called South–South flows) are now growing more rapidly than North–South flows, particularly FDI
  • overall, aid in the form of grants and concessional loans has risen, while net lending by the official sector on non-concessional terms has declined significantly

Some of the report’s conclusions are:

  • to ensure economic stability, developing countries must manage capital flows effectively: there is a need for improved macroeconomic policies to minimise risk such as excessive exchange rate volatility and asset price bubbles. Measures should include prudent accumulation of reserves, careful management of oil revenues, and improvements in standards for the oil sector
  • multilateral cooperation is the key to resolving global financial imbalances: policy-makers in emerging market economies should strive to strengthen institutions and promote policies and mechanisms that will improve their ability to navigate in a world of increasingly integrated and interdependent financial and production systems

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