26. The present fiscal and current accoun! imbalances pose a serious threat to thehopes for less volatile exchange rates, an open trading sy6tem, stable interestrates and renewed qrowth. Unless policies are changed, a slord-down is Iikely. Insuch a case, industrial countries might grow on an average at about 2.5 per centt{bich. combi.ned r.rith present protectionism, would'result in developing countriesexperiencing export growth at no more than 3 per cent per annum. rf rear intereshrates remained unchanged. the debt-service ratios of developing countries eouldgror.r, leaving no scope for imports to grow at all. OveraLl growth in grossnaEionaf product (cNp) in developing countries would be only 3 per cent, leavingperhaps one half of I per cent for per capita grolrth. This sombre picturehiqhrights the precariousness of the present situation and dralrs attention toissues of a systemic nature involving the internationar flKrnetary and tradinqsystems. C. The internaLional monetarv svstem 27. The system agreed on at Bretton woods contained explicit provisions concerningthe essenti.aL aspects of relations among the currencies of independent nationstaces. Among the provisions were (a) the exchange rate rdgine, (b) the nature o€international reservest (c) the process of ba la nce-of-pa yments adjustment, (d) thedegree of currency convertibilityt and (e) the r€gimes for short- and long-lermcapital movements. The agreenent also provided, for the first time ln history. forthe management of the system as a joine international enterprise. 28. convertibirity among key currencies lras restored. Long-term capital eovemencswere gradually deregul.ated, but it was understood at Bretton Woods that short_termcapitar flows were !o be subjec! to controls. This lras requlred by the logiq of asyslem that relied on discrete and si.gnificant exchanqe rate changes in prealictabledi.rections, thu6 creating one-way options for currency speculation.
**Analysis**
The text discusses the current state of the international economy, highlighting the imbalances and potential consequences of not addressing them. It also touches on the history of the international monetary system and the Bretton Woods agreement. The focus is on the economic system and its impact on countries, rather than on specific sectors like agriculture or health.

**Category**
International trade, Economic development