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Abstract
Unsustainable financial imbalances in the public sector were the source of developments that precipitated the need for IMF support in virtually all the 36 countries with Fund arrangements approved between mid-1988 and mid-1991 (see Chart 1-1). Fiscal adjustment was, therefore, at the heart of every program. Typically, large public sector borrowing requirements had led to combinations of unmanageable external current account deficits, heavy domestic and foreign indebtedness, reliance on arrears, crowding out of private activity, and high inflation. The mix of these consequences in any particular country depended most importantly on the size and duration of the fiscal imbalances and how they were financed.1
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