ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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POLITICS-Deal-Makers Opera

industrial countries, according to the IMF. In the developing countries, while the inflow of foreign capital may increase the total funds available for investment, it is likely to partially replace national saving by raising domestic consumption. Suggesting a distinct negative relationship between domestic saving, especially private saving, and the inflow of foreign saving, the IMF review brings out how capital flows into the major Latin American countries have lowered national saving rates because these countries simultaneously liberalised and opened up their financial systems. The high growth Asian countries, on the other hand, followed very cautious policies in opening up and liberalising their financial sectors and the result has been that in their case capital inflows have supplemented national saving and increased overall investment. The IMF review also finds that the impact of foreign aid on saving, though mixed, has been generally negative, with some 40 per cent of aid on average going into consumption.

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