VI Conclusions and Recommendations
- Paul Mentré
- Published Date:
- April 1984
International bank lending has contributed to the expansion of the world economy in the past ten years. The simultaneous occurrence in 1982 of high interest rates, political tensions, and debt crises in several major borrowing countries has led to a major shift in the attitudes of bankers, has sharply reduced new lending, and has added to the difficulties encountered by certain countries.
There is a need for a cooperative endeavor through which governments, central banks, commercial banks, and international organizations can demonstrate their common desire to restore confidence in the marketplace. The Fund has to be a partner in this overall process.
Proposals to that effect have been made in the course of this paper and belong to four broad categories.
1. Better assessment of trends in the market and of the attitude of commercial banks toward borrowing countries. These would include a deeper analysis of capital flows, with special attention to interbank transactions; an improvement in the collection of statistical data and additional efforts made by member countries to release adequate information; and a further examination of the usefulness of setting up in the Fund an internal country risk assessment statistical model.
2. Contribution to better external debt management in individual countries. This would involve greater attention to liquidity and debt developments in consultation reports; technical assistance to help countries diversify and monitor their external debt; and close association with supervisors in both debtor and creditor countries, through the Basle Committee on Banking Regulations and Supervisory Practices.
3. Constructive collaboration with commercial banks. Included here would be the development of ad hoc contacts through various channels, notably the Institute of International Finance; better integration of private financial flows in Fund programs with a view to avoiding undue recourse to short-term borrowing; and complementary financing for countries re-entering the market after a phase of adjustment.
4. Better handling of actual or potential debt crises. There should be adequate Fund involvement in rescheduling negotiations through discussions with Paris Club members on rescheduling patterns and possibly through an elaboration of guidelines for rescheduling bank claims; appropriate action to cope with liquidity crises; and adequate international cooperation among central banks acting as lenders of last resort.
The coordinated strategy for averting an international debt crisis that was initiated in 1982–83, in full cooperation with borrowing countries, creditor countries, the BIS, and commercial banks, has displayed the ability of the international community to face major challenges. In the months to come, continued efforts, based on the experience of the past two years, will be needed to help the international bank lending market overcome its crisis of confidence, and thus reduce the risks of a too short-lived and too narrowly based world economic recovery.