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Ms. Julianne Ams, Mr. Tamon Asonuma, Mr. Wolfgang Bergthaler, Ms. Chanda M DeLong, Ms. Nouria El Mehdi, Mr. Mark J Flanagan, Mr. Sean Hagan, Ms. Yan Liu, Charlotte J. Lundgren, Mr. Martin Mühleisen, Alex Pienkowski, Mr. Gustavo Pinto, and Mr. Eric Robert

Abstract

1. The origins of the 1980s Debt Crisis can be traced back to the acute shocks to the international monetary system in the 1970s: the collapse of the Bretton Wood system; the major oil prices hikes; and the substantial liberalization of international finance. The associated build-up of imbalances and vulnerabilities during this period ended abruptly in the early 1980s, and the IMF had to deal with its first systemic debt crisis. Given the novelty of this event, it took time for debtors, creditors, and the international community to understand the magnitude of the problems faced by these indebted economies. Reforms to the crisis-resolution framework occurred gradually and often in a piecemeal fashion. But the reforms made during the 1980s set the foundation for the IMF’s policies and principles today, remaining robust despite a continually changing landscape.

Ms. Julianne Ams, Mr. Tamon Asonuma, Mr. Wolfgang Bergthaler, Ms. Chanda M DeLong, Ms. Nouria El Mehdi, Mr. Mark J Flanagan, Mr. Sean Hagan, Ms. Yan Liu, Charlotte J. Lundgren, Mr. Martin Mühleisen, Alex Pienkowski, Mr. Gustavo Pinto, and Mr. Eric Robert

Abstract

1. The origins of the 1980s Debt Crisis can be traced back to the acute shocks to the international monetary system in the 1970s: the collapse of the Bretton Wood system; the major oil prices hikes; and the substantial liberalization of international finance. The associated build-up of imbalances and vulnerabilities during this period ended abruptly in the early 1980s, and the IMF had to deal with its first systemic debt crisis. Given the novelty of this event, it took time for debtors, creditors, and the international community to understand the magnitude of the problems faced by these indebted economies. Reforms to the crisis-resolution framework occurred gradually and often in a piecemeal fashion. But the reforms made during the 1980s set the foundation for the IMF’s policies and principles today, remaining robust despite a continually changing landscape.

Ms. Julianne Ams, Mr. Tamon Asonuma, Mr. Wolfgang Bergthaler, Ms. Chanda M DeLong, Ms. Nouria El Mehdi, Mr. Mark J Flanagan, Mr. Sean Hagan, Ms. Yan Liu, Charlotte J. Lundgren, Mr. Martin Mühleisen, Alex Pienkowski, Mr. Gustavo Pinto, and Mr. Eric Robert

Abstract

1. The debt crisis ended along with the 1980s, and 1989 saw interest rates drop and prospects for economic growth brighten. With the 1990s, private capital began flowing again to emerging and developing countries. This renewed interest in investment was bolstered by liberalization of international capital flows and widespread deregulation of financial institutions and capital markets. As the recipient economies found, however, the speculative inflows were subject to sudden capital flow reversals and stops.

Ms. Julianne Ams, Mr. Tamon Asonuma, Mr. Wolfgang Bergthaler, Ms. Chanda M DeLong, Ms. Nouria El Mehdi, Mr. Mark J Flanagan, Mr. Sean Hagan, Ms. Yan Liu, Charlotte J. Lundgren, Mr. Martin Mühleisen, Alex Pienkowski, Mr. Gustavo Pinto, and Mr. Eric Robert

Abstract

1. The debt crisis ended along with the 1980s, and 1989 saw interest rates drop and prospects for economic growth brighten. With the 1990s, private capital began flowing again to emerging and developing countries. This renewed interest in investment was bolstered by liberalization of international capital flows and widespread deregulation of financial institutions and capital markets. As the recipient economies found, however, the speculative inflows were subject to sudden capital flow reversals and stops.

Ms. Julianne Ams, Mr. Tamon Asonuma, Mr. Wolfgang Bergthaler, Ms. Chanda M DeLong, Ms. Nouria El Mehdi, Mr. Mark J Flanagan, Mr. Sean Hagan, Ms. Yan Liu, Charlotte J. Lundgren, Mr. Martin Mühleisen, Alex Pienkowski, Mr. Gustavo Pinto, and Mr. Eric Robert

Abstract

1. In 2001–02, Argentina experienced one of the worst economic crises in its history. The severity of the crisis, and the economic/political complexity for debt crisis resolution made it particularly important to examine what lessons could be learned from it [40]. The circumstances of the crisis highlighted the need to establish a better framework for countries to exit in a timely fashion from unsustainable debt dynamics. In the aftermath of the crisis, the IMF focused its work particularly on two areas aiming to promote a more orderly system for the resolution of sovereign debt crises: rethinking the framework for committing exceptional levels of IMF resources, and considering methods for addressing collective action problems. On the latter, the IMF considered in parallel both statutory and contractual approaches.

Ms. Julianne Ams, Mr. Tamon Asonuma, Mr. Wolfgang Bergthaler, Ms. Chanda M DeLong, Ms. Nouria El Mehdi, Mr. Mark J Flanagan, Mr. Sean Hagan, Ms. Yan Liu, Charlotte J. Lundgren, Mr. Martin Mühleisen, Alex Pienkowski, Mr. Gustavo Pinto, and Mr. Eric Robert

Abstract

1. In 2001–02, Argentina experienced one of the worst economic crises in its history. The severity of the crisis, and the economic/political complexity for debt crisis resolution made it particularly important to examine what lessons could be learned from it [40]. The circumstances of the crisis highlighted the need to establish a better framework for countries to exit in a timely fashion from unsustainable debt dynamics. In the aftermath of the crisis, the IMF focused its work particularly on two areas aiming to promote a more orderly system for the resolution of sovereign debt crises: rethinking the framework for committing exceptional levels of IMF resources, and considering methods for addressing collective action problems. On the latter, the IMF considered in parallel both statutory and contractual approaches.

Ms. Julianne Ams, Mr. Tamon Asonuma, Mr. Wolfgang Bergthaler, Ms. Chanda M DeLong, Ms. Nouria El Mehdi, Mr. Mark J Flanagan, Mr. Sean Hagan, Ms. Yan Liu, Charlotte J. Lundgren, Mr. Martin Mühleisen, Alex Pienkowski, Mr. Gustavo Pinto, and Mr. Eric Robert

Abstract

1. In the aftermath of the Argentine crisis, IMF members experienced a relatively calm period. There were few IMF-supported programs (Brazil, Turkey, Uruguay) under the Exceptional Access Policy (EAP—see chapter 3), largely due to balance of payments problems in the current account, and relatively few sovereign debt restructurings (e.g., Uruguay, Dominican Republic, Grenada, and Belize). However, imbalances and vulnerabilities were growing and subsequently erupted in 2007 [58].

Ms. Julianne Ams, Mr. Tamon Asonuma, Mr. Wolfgang Bergthaler, Ms. Chanda M DeLong, Ms. Nouria El Mehdi, Mr. Mark J Flanagan, Mr. Sean Hagan, Ms. Yan Liu, Charlotte J. Lundgren, Mr. Martin Mühleisen, Alex Pienkowski, Mr. Gustavo Pinto, and Mr. Eric Robert

Abstract

1. In the aftermath of the Argentine crisis, IMF members experienced a relatively calm period. There were few IMF-supported programs (Brazil, Turkey, Uruguay) under the Exceptional Access Policy (EAP—see chapter 3), largely due to balance of payments problems in the current account, and relatively few sovereign debt restructurings (e.g., Uruguay, Dominican Republic, Grenada, and Belize). However, imbalances and vulnerabilities were growing and subsequently erupted in 2007 [58].

International Monetary Fund

Abstract

The 1980s saw an unprecedented growth in the volume and the complexity of international financial transactions (Chart 1). This has been accompanied by a significant deterioration in the coverage and quality of the data. As a result, it has become very difficult, and at times impossible, for policymakers to base judgments on reported balance of payments statistics, particularly statistics on international capital flows. Unless appropriate action is taken, there will almost certainly be a further deterioration, with inevitable consequences for policymaking.

International Monetary Fund

Abstract

The Interim Committee of the Fund’s Board of Governors, in its communique of September 25, 1989, “encouraged the IMF’s Executive Board to continue improving the analytical and empirical framework underlying multilateral surveillance, including the measurement, determinants, and systemic consequences of international capital flows.” At a meeting in December 1989, the Executive Board decided that the Fund should undertake a study on the measurement of international capital flows. To this end, it was agreed that a working party of national and international balance of payments experts, drawn from industrial and developing member countries, be constituted under the chairmanship of Baron Jean Godeaux of Belgium. To support the Working Party, a small group of technical experts was organized and attached to the Statistics Department of the Fund. An interim report was submitted to the Managing Director in December 1990.