Net capital flows to developing countries rise to pre-crisis levels

Dec 15, 2011, 21:04 GMT

Washington - Net capital flows to developing countries increased by 68 per cent in 2010, according to a World Bank report released Thursday.

The report, Global Development Finance 2012: External Debt of Developing Countries, said net capital flows - the movement of money for the purpose of investment, trade or business production - to developing countries amounted to 1.13 trillion dollars in 2010, compared to 675 billion dollars the previous year.

Net capital flows had peaked at 1.22 trillion dollars in 2007, before the start of a severe economic and financial crisis that the world is still trying to leave behind.

Last year's rise was fuelled by a 'massive jump in short-term debt, a strong rebound in bonds and a moderate rise in equity flows,' according to the World Bank.

The external debt stock of developing countries as a bloc increased by 437 billion dollars over the course of 2010 to total 4 trillion dollars. This amounted to 21 per cent of those countries' combined national income and to 69 per cent of their exports.

The rebound in capital flows was concentrated in 10 middle income countries. In these countries, net capital inflows rose on average by nearly 80 percent in 2010, almost double the rate of increase - 41 percent - recorded by developing countries.

These 10 countries accounted for 73 percent of developing countries' GNI (gross national income) and received 73 percent of total net capital flows to developing countries in 2010, the World Bank said.

East Asia and the Pacific, led by China, topped regional increases in net capital flows in 2010, with a 90-per-cent rise to 447 billion dollars.

The Middle East and North Africa were the only regions with a drop in net capital flows in 2010. They fell by 10 percent to 26 billion dollars.