The managing director of the International Monetary Fund said recently that the world is facing ‘the most difficult combination of economic policy decisions since the reconstruction period following World War II’. It is unfortunate that action, so far, in the face of mounting inflation and balance of payments difficulties, has been at a national level rather than on the international level which the situation requires. In particular, there is still an urgent need to make concrete arrangements for dealing with the capital flows resulting from the rise in oil prices, and to offset the deflationary impact of the latter, while, unless aid is increased substantially, the plight of some developing countries will become increasingly desperate as the real value of existing aid flows is rapidly eroded by inflation, and as their oil bills fall due for payment. Nevertheless the restoration of oil supplies combined with the delay between the raising of prices and actual payments at the new rates seems to have induced an unwarranted mood of euphoria in the consuming countries in the first few months of this year.