COST OF OIL Warning about borrowing

Press, Volume CXIV, Issue 33655, 3 October 1974, Page 13

COST OF OIL Warning about borrowing

(N.Z P A -Reuter —Copyright) WASHINGTON, October 2. The Australian Treasurer (Mr Frank Crean) said yesterday that importing countries would have to adjust domestic consumption to meet the -rising cost of oil.

"Oil importing countries will have to accept, sooner or later, that they cannot finance the higher cost of oil imports indefinitely by borrowing abroad,” he told the annual meeting of the International Monetary Fund and World Bank. “So it may be as well to start on the process of domestic adjustment, in the

recognition that oil is now a dearer commodity, and that production and consumption patterns may have to change accordingly in the medium, if not the short term.” For those countries hardest hit by higher oil prices, whatever the level they may finally settle at, adjustment of production, consumption and trading patterns will take time, Mr Crean said. He said that developed countries as a group—though not individually — probably

would be able to obtain all the capital they needed from normal capital markets to help finance deficits caused by oil imports. “Many of the developing countries are in a different category,” the Australian Treasurer said.

He said that the I.M.F.’s special oil facility, under which surplus revenue from oil exports is redirected to help importing countries meet price increases, helped them obtain capita) at below commercial rates. “However,” he said, “it is clear that some developing countries cannot afford to pay even 7 per cent to finance imports.

“It is one thing to make facilities available to developing countries for financing oil deficits," he said. “It is another thing for developing countries to produce the additional real resources required to service such financial transfers.” Mr Crean also said that Australia was determined to increase its aid efforts to developing countries. But, he said, “as well as ensuring more adequate financial flows, we must think seriously about a number of factors influencing development which go beyond the provision of finance.” He said that developing countries should also be assured the appropriate technology, export markets for their commodities and raw materials,, and aid protects tailored to the type of resources available in those countries.