Faculty / School
Faculty of Business Administration (FBA)
Was this content written or created while at IBA?
No
Document Type
Article
Source Publication
Finance & Development
Keywords
Debt, Debt Strategy, Bank, Developing countries
Disciplines
Finance | Growth and Development
Abstract
The debt crisis that emerged in the early 1980s continues to be a dominant economic policy issue for a group of developing countries. Some advances have been made since then toward finding a satisfactory resolution of this problem. The international financial system is more stable today than it was in 1982, and a number of developing countries have embarked on policy reforms to restructure their economies. But the debt overhang has made it difficult for the highly indebted middle-income countries to resume stable economic growth. It is in this context that the recent initiatives to reduce the debt of these countries mark a new phase in the evolving debt strategy (see box on initiatives, page 16)
The earlier phase of this strategy, begun in 1985 and known as the Baker plan, had three main ingredients: (1) the pursuit of adjustment policies in the debtor countries; (2) concerted new lending by commercial banks; and (3) public loans, particularly by the international institutions. The stumbling block in its implementation has been a serious shortfall in commercial bank lending to the highly indebted countries (HICs) and the uneven progress made by these countries in their adjustment efforts. For a growing number, the past few years have brought declining net resource inflows, persistent payments difficulties, and low rates of domestic investment. In 1986, net lending to these countries was negative, and the 1988 net figure, while positive, was only a quarter of that for 1984, even though interest payments to banks were almost as high as those made in 1984.
Citation/Publisher Attribution
Husain, I. (1989). Recent experience with the debt strategy. Finance and Development, 26(3), 12-15.
Recommended Citation
Husain, I. (1989). Recent experiences with the debt strategy. Finance & Development, 12-15. Retrieved from https://ir.iba.edu.pk/faculty-research-articles/243
Publication Status
Published
