Oil imports and the foreign debt of developing African countries

This study examines the oil transactions between 1971 and 1983 of African nations supported by the Agency for International Development, with the objective of estimating the proportion of current indebtedness attributable to crude oil price increases. A data base was constructed, drawing on information from several data series of the International Monetary Fund, the World Bank, and the United Nations. These data were examined using a series of alternative formulas that controlled for particular characteristics of nations with and without oil refineries and controlled, to some degree, for data deficiencies. The results indicate that oil price increases have played a prominent role in debt creation, though perhaps a lesser role than some had suggested. Estimates of the share of debt incurred due to oil price increases range from less than one-third to more than two-thirds. The recent decreases in oil prices may relieve some pressures for continued debt accumulation, although a reduction in pressures is likely to occur less slowly than price decreases. The vulnerability of developing countries to oil price increases underlines the attractiveness of development projects that lessen reliance on imported oil and oil products.