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Business and Economics > Investments: Stocks

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Cover IMF Working Papers
From Toronto Terms to the HIPC Initiative: A Brief History of Debt Relief for Low-Income Countries
Ms. Christina Daseking
and
Mr. Robert Powell
The low-income country debt crisis had its origins in weak macroeconomic policies, and official creditors’ willingness to take risks unacceptable to private lenders. Payments problems were initially addressed through nonconcessional reschedulings and new lending that maximized financing while containing the budgetary costs for creditors. This led to an unsustainable buildup in debt stocks. More recently, debt ratios have improved, reflecting both adjustment and substantial debt relief. The paper estimates debt relief initiatives since 1988 have cost creditors at least $30 billion, and possibly much more. This compares with the estimated costs of about $27 billion under the enhanced HIPC Initiative.
Keywords:
WP; debt forgiveness; reduction option; cash flow; discount rate; External Debt; HIPCs; Low-Income Countries; Paris LIC Paris Club; debt reduction; present value; PV reduction; Debt relief; Debt reduction; Debt rescheduling; Debt service; Stocks; Global
Cover Compensatory Financing Facility
Compensatory Financing Facility
International Monetary Fund

Abstract

This paper examines compensatory financing facility in the IMF. Compensatory financing facilities are easy to administer and can give immediate relief to primary exporting countries when their export earnings fall. The IMF’s compensatory financing facility was established in 1963, but only 57 drawings, totaling SDR 1.2 billion, were made during its first 13 years. A turning point was the liberalization of the facility in December 1975, which occurred when commodity prices were at their trough because of the severe recession in 1975. From January 1976 to March 1980, there were 107 drawings totaling SDR 4.0 billion under the facility.

Keywords:
PAM; STABEX transfer; unit value; shortfall year; trend value; export earnings; Export earnings; Export performance; Exports; Agricultural commodities; Caribbean; Africa; commodity export; financing facility; export commodity