Capital accumulation is found to be the most impor- tant source of economic growth in most of the less developed countries (LDCs) [Ahmad, 1986, pp. 11-25]. Furthermore "the process of economic growth and capi- tal accumulation are closely interconnected whether there is abundant labour or not" [Cairncross, 1963, p. 244]. Thus for acceleration of economic growth in LDCs, the top priority may be attached to the accu- mulation of capital.
Since capital accumulates through the process of investment, to accelerate economic growth in most of the LDCs, one of the important strategies is, therefore, to increase the rate of investment. But these LDCs are unable to accelerate the rate of investment due to lack of either domestic saving or foreign exchange.