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Global Development Finance 2006: The Development Potential of Surging Capital Flows


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The year 2005 was a landmark in global development finance. Private capital flows to developing countries reached a record net level of $483 billion, much of them going to middle–income countries that took advantage of the surge to improve their external debt profile and build official reserves of foreign exchange.  For the poorer countries, which have limited access to market-based external finance, the development community stepped up efforts to enhance aid flows and to reduce debt burdens through new multilateral debt-relief initiatives endorsed by the G-8 group of industrial countries in July 2005.

Global Development Finance 2006 highlights this unique opportunity to bolster development efforts and place development finance on a stable footing. The report discusses the structural transformation and mainstreaming of emerging debt markets, the increased importance of the Euro, the fast-growing phenomenon of credit default swap transactions on emerging sovereign and corporate names, and the greater reliance in developing countries on local currency financing. It also highlights the difficult challenge that many emerging market economies and oil exporters face in managing the large inflows of foreign exchange generated from capital flows and trade transactions.

This report was prepared by the International Finance Team of the World Bank's Development Prospects Group. Mansoor Dailami was the principal author, with direction by  Uri Dadush. The report was prepared under the guidance of World Bank Chief Economist and Senior Vice President Francois Bourguignon. Core team members include: Dilek Aykut, Hans Timmer,  Johanna Francis, Andrew Burns, Eung Ju Kim, Jacqueline Irving, Douglas Hostland, and Neeltie Van Horen.

General Press Release: English, Croatian, Portuguese, French, Hungarian, Spanish, Japanese, Russian, Turkish, Arabic, and Hindi

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