Leaders of emerging countries with chronic external deficits should not discourage foreign investors

Some emerging countries in the recent period have had a savings shortfall and a chronic external defici t . It is vital for these countries that they inspire confidence among foreign investors, otherwise a halt to non-resident capital inflows will lead to a steep depreciation of the exchange rate. Such a loss of confidence among foreign investors, brought about by worrying domestic policies, can be seen at present in Argentina, Turkey and South Africa.