quantities. Tocontrol imports fromthepresent lowerlevelimplies acontinuing commitment toimportsubstitution andahighdegreeofcontrol'over imports, thus impairing thepossibility ofpursuing moreoutward oriented andopenpolicies by thedebtorcountries. 81.Inaddition, ,itmaynotbefeasible forthedebtorcountries tosustain a continuing resource transfer tocreditor countries ofarelatively highpercentage oftheirgrossproduct without engendering economic haemorrhaging andsocial turmoil. Apersistent surplus oftheSouthwithrespect totheNorthontheorder of$200billion peryearformorethanadecadewouldberequired topay'off the debtandinterest. Acceptance ofsuchacontraction inthedemandforimports on thepartoftheNorthandadiversion ofscarceresources toextraneous usesonthe partoftheSouthseemquiteunlikely. 82.Thereisalsotheproblem ofsmalldebtorcountries whichhavehadandwill cont"nue torelyonimportrestraint andlowgrowthratestoenablethemto alleviate theirbalance-of-payments position. Forthesecountries thereislittle hopeoffavourable debtrescheduling orofinflows ofnewcapital. Thereiseven limited incentive forlending frombanks. Further, thosecountries donotenjoy theflexibility ofthelargerdebtorcountries inreallocating resources andin increasing theirexports inresponse tochanges inforeign demandandreal effective exchange rates. Withweakcommodity prices, unfavourable termsoftrade andshrinkage incapital inflows, thechances oftheir,beingabletocopewith theirdebtrepayment anddebtservice obligations andstillmaintaining the existing lowleveloflivingareverypoorindeed. 6.Volatile exchange ratesandthe"strong" dollar 83.Thefirstdecadeunderfloating exchange rates,seemstohavecoincided witha periodoflowergrowthinworldGDPtogether withhighergrowthinmoneysupplyand higherratesofinflation andunemployment. Inaddition, thecurrent systemof floating rateshastendedtogenerate volatile fluctuations inexchange ratesand misalignments andhasfailedtoexertpressure onnations toco-ordinate their economic policies. Underafloating system, exchange ratesaredetermined notonly bythebalance ofcurrent supplies ofanddemandforcurrencies thatarisefrom needsrelating totradetransactions andlong-term financial flows,but,whatis evenmoreimportant, bythedemandandsupplysituation ofcurrencies ascapital assets, basedonperceptions Onfutureyieldsandexchange ratelevels. Thereis thusamajorspeculative demandfororsupplyofcurrencies inaddition tothe /...A/40/5l9 English Page36 usualtransactions demand, thishasaccounted formuchofwhathashappened thus farandfortheapparent malfunctioning ofthecurrent floating ratesregime. 84.Toindicate theextentofsuchfluctuations duringthepastdecade, especially thepastfiveyearssince1980,theappreciation (ordepreciation) ofthedollarin termsofothercurrencies isgivenintable13.Itcanbeseenthatinthe1970s, especially in1973andtheyears1977-1978, the·dollardepreciated against theSDR (special drawing right), whichisacomposite tradeweighted indexcomprising the basketoffivenational currencies, including thedollar. 111Thedollar depreciation amounted toabout10percentineachofthe~periods inquestion. Between 1980and1984,thedollarshowedafour-year appreciation against theSDR, amounting to30.2percentduringtheperiod. 85.Theresultant "strong" dollarsince1980hasbeenduetoacombination of factors, including thehigherrealinterest ratesandthestrongeconomic performance andwidelyperceived stronggrowthprospects intheUnitedStates, as wellastheperception ofthatcountry asasafehavenforfinancial andother investments. Suchperceptions cananddochangeovertime.Asuddenchange thereof canworkhavocincausing aflightfromandanabruptdepreciation ofthe dollar, withattendant consequences. Thestrongdollarhasseriously increased the external debtanddebt-servicing burdenofthedeveloping countries andhas contributed toreducing theirexportgrowthpotential through depressed commodity pricesintermsofdollars. Ontheotherhand,somedeveloping countries havebeen abletocapitalize onimproved competitiveness byincreasing theirexportvolumeto theUnitedStates. 86.volatile exchange ratefluctuations andprolonged misalignments amongthe world's majorcurrencies canimpedeexpansion inworldtradeanddecision-making in world-wide investments inthemediumand"longterm.Theycertainly wouldcause serious problems ofdebtandreserve management inthedevelopihg countries. Besides, suchexchange ratemisaligRments cananddobecomecumulative inone direction forsometime,inthesensethatthesemisalignments failtoreverse the trendintheshorttermandcontinue toaccelerate thedeviations fromwhatcanbe
**Analysis**
The text appears to be a discussion on the economic issues related to international trade, debt, and currency fluctuations. It highlights the challenges faced by developing countries in repaying their debts, the impact of volatile exchange rates on their economies, and the need for a more balanced approach to international trade.

**Category**
International trade