The use of export projections in allocating foreign aid among and domestic resources within developing countries

Foreign exchange shortages have been considered by many economists as the effective restraint to growth in the developing world. This is especially the case insofar as less developed countries (LDC's) are limited in their capacity to purchase imports from abroad that are needed to complement domestic factors of production. Exports obviously play an important role in this context since they constitute the primary source of foreign exchange for most LDC's. It is for this reason that a number of projections of future export earnings of LDC's have been made. These projections are presumably useful in decision making of various kinds. However, there is not much evidence that would indicate ways in which the projections have been or might conceivably be used. The purpose of this paper, accordingly, is to examine two such possible uses of export projections in connection with: (i) the allocation of foreign aid by donor countries among LDC's; and (2) the allocation of resources over time in individual LDC's.