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

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On Financing Infrastructure on the Strength of Reserves

If the real resources for infrastructure outlays are to come from an increase in import surplus that is met through a running down of foreign exchange reserves, then any such proposal would have two obvious flaws. We would be using short-term finance, which mainly accounts for the accumulated reserves, for long-term investment. And we would be using loans repayable in foreign exchange for investing in projects which are not foreign exchange earners themselves. These two together constitute a potent brew for precipitating a future liquidity crisis for the country

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