Rather than being based on loans from governments and international institutions such as the World Bank and IMF to governments and state-owned enterprises, new international financial flows now mainly comprise various types of investment flows and loans between private sector investors and private companies for commercial purposes. (See Table 1)3.
In addition, governments themselves are regaining access to financing from commercial sources. Since syndicated bank loans were mostly discredited by the Latin American debt crisis of the 1980s, developing country governments now raise most private finance via bond issues: bond issues accounted for 83% of net public and publicly-guaranteed borrowing by developing countries from commercial sources in 1996, compared with just 7% in 1980 (World Bank, 1998).
Recent trends in financial flows are shown in Figures 1 and 2. There are three dimensions to the shift in financing5:
a shift from official to commercial sources of finance (A);
a shift from public to private recipients of financial flows (B); and
a shift from loans to equity instruments (including direct investment) as mechanisms (C).