Managing exceptional commodity export profits

At various times in the 1970s there were sharp price increases in phosphates, coffee, cocoa, uranium, and several other commodities important to the economies of some developing countries. Paradoxically many exporters of these commodities subsequently faced difficulties partly as a result of the way they managed such exceptional gains. Typically government revenues were boosted by higher export earnings (either through taxation or participation in profits) and used to raise domestic expenditure to a level that could not be sustained when prices eventually fell. Countries took advantage of their credit standing to borrow on commercial credit terms, resulting eventually in a damaging increase in the debt burden.