Is the balance of payments a problem?

A persistent balance of payments shortage is bad when used to finance consumption, but good when financing imports of suitable capital which raise productive capacity.

• Imports of goods for recent consumption satisfy requirements currently but, unlike capital goods, do not raise productive capacity. Simply BoP shortages from importing capital goods can be then arranged.

• Exports. Whole export earnings depend onto both the quantity of exports sold and the price paid for exports. Specified export prices reduce over time, LDCs lose revenue unless they can repeatedly increase export volumes.