Front Matter

Front Matter

Paul Mentré
Published Date:
April 1984
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    The term “country,” as used in this publication, does not in all cases refer to a territorial entity that is a state as understood by international law and practice; the term also covers some territorial entities that are not states but for which statistical data are maintained and provided internationally on a separate and independent basis.

    International Standard Serial Number: ISSN 0251-6365

    Price: US$5.00

    (US$3.00 to university libraries, faculty members, and students)

    Address order to: External Relations Department, Attention Publications International Monetary Fund, Washington, D.C. 20431 U.S.A.


    The following symbols have been used throughout this paper:

    • …to indicate that data are not available;

    • — to indicate that the figure is zero or less than half the final digit shown, or that the item does not exist;

    • – between years or months (e.g., 1979–81 or January–June) to indicate the years or months covered, including the beginning and ending years or months;

    • / between years (e.g., 1980/81) to indicate a crop or fiscal (financial) year.

    “Billion” means a thousand million.

    Minor discrepancies between constituent figures and totals are due to rounding.


    The international economic scene has been dominated in the past two years by the emergence of debt-servicing difficulties in major developing countries and by strains in the international banking system.

    These challenges have been met by coordinated and responsible attitudes of all interested parties: international organizations, governments of creditor countries, governments of debtor countries, central banks, and commercial banks.

    As a contribution to the actions and policies that the International Monetary Fund had to develop in such circumstances, I asked an external consultant, with previous knowledge of the Fund’s approaches and methods, to undertake a review of the various aspects of the relationship between the Fund, commercial banks, and member countries.

    The report prepared by Mr. Paul Mentré, a former Executive Director of the Fund, was transmitted to the Fund’s Executive Board in mid-1983 and was subsequently discussed at an Executive Board Seminar.

    Obviously, this is not a Fund document, in the sense of expressing the views of the Executive Directors. Nor does it necessarily reflect the opinions of Fund management and staff. It holds up Fund policies to a critical analysis and it canvasses the ideas of many interested parties on possible improvements. In particular, in the seminar discussion, it was stressed by Executive Directors, the management, and the staff that suggestions made in the report on guidelines for rescheduling, country risk assessment models, interbank transactions, short-term facilities, and cofinancing with commercial banks were at variance with present or contemplated Fund policies. In a changing environment, progress can be made only through an open debate, and this report is being published as a contribution to such a debate.

    As I see it, the solutions to the problems many countries, and the international community at large, are still facing will not be found through the application of any general scheme that cannot take into account the specific social, political, financial, and economic situations of individual countries. The solutions should be based, first of all, on courage and statesmanship in implementing the needed adjustment policies in the debtor countries. They should also be based on a cooperative attitude of all interested parties, who know that they have common stakes, and on a willingness to adapt mechanisms and procedures to deal with individual situations. The example of Mexico in 1982–83 shows what can be done within the context of a comprehensive strategy.

    The task is difficult. Each participant will properly approach the exercise with its own responsibilities and objectives in mind. Commercial banks have to be concerned about the safety of their claims, the adequacy of their capital, and the ultimate protection of their depositors. Bank regulators have to be concerned about the soundness of each national banking system. Central banks have to judge the proposed action against both their domestic monetary situation and the international monetary situation. Governments of creditor countries have to allocate resources among conflicting priorities, and, above all, debtor governments have to adjust to the reality of the situation and live up to their international obligations while working to create the conditions essential for a satisfactory rate of growth in the future.

    The cooperation between the various participants, which has been implemented with success in most cases, must continue. International organizations, including the Fund, can be major contributors in structuring and focusing this collaboration.

    International bank lending has slowed sharply in the last 18 months, and, in a number of cases, a large part of bank lending to developing countries had to take the form of a proportional increase in the existing exposure of each individual bank in a given country, in the framework of overall financial packages involving other participants such as the Bank for International Settlements, creditor governments, the World Bank, and the Fund. This has been the proper answer to the problem of reconciling the need to secure adequate financing with the legitimate desire of each participant to ensure an equitable and fair burden of risk sharing. But we need to remember that we must collectively aim at the restoration of a genuine marketplace where capital flows are determined by spontaneous relations between borrowers and lenders. The challenge of the coming years will therefore be to ensure a transition from present patterns of financing to a decentralized and competitive system that would ensure adequate financing and lay a basis for the restoration of growth and employment, while avoiding excesses in debt accumulation. The key to a successful transition will be a demonstrated determination by debtor countries to pursue their adjustment processes and a willingness by creditors to assist those countries in the framework of an orderly and realistic medium-term approach.


    J. de Larosière

    Chairman of the Executive Board


    Managing Director

    International Monetary Fund

    Prefatory Note

    This study was conducted by the author in 1982 and 1983, in his capacity as an external consultant, in contact with the European Department and the Exchange and Trade Relations Department and, as and when needed, in consultation with other departments of the Fund. It is based on discussions with officials, central bankers, members of international organizations, and commercial bankers in industrial countries, and visits to European borrowing countries at various stages of their debt cycles.

    The author is indebted to Mr. L. A. Whittome, Counsellor and Director of the European Department; Mr. C. David Finch, Director of the Exchange and Trade Relations Department; and Mr. Aldo Guetta, Director of the Fund’s Office in Europe; and their colleagues, notably, Mr. Patrick de Fontenay, Senior Advisor in the European Department; Mr. Richard C. Williams, then Assistant Director in the Exchange and Trade Relations Department (now Senior Advisor in the Asian Department); Mr. C. M. Watson, Division Chief in the Exchange and Trade Relations Department; and Mr. Robert W. Ley, Senior Economist in the Fund’s Office in Europe.

    The paper has benefited greatly from contributions and helpful comments by the Managing Director, the Deputy Managing Director, members of the Executive Board, the Fund staff, and the staffs of the Bank for International Settlements, the International Bank for Reconstruction and Development, and the Organization for Economic Cooperation and Development. The institutions visited in the course of the study are listed in the appendix.

    Responsibility for the content of the study, which deals with a wide range of issues, in many instances the subject of controversial discussions, remains solely with the author. The report is of a personal character and does not represent Fund attitudes or judgments.

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