Back Matter
  • 1 0000000404811396 Monetary Fund


This paper, following two earlier studies, reviews the arrangements for restructuring commercial bank and official debt up to early 1985.

APPENDIX I Country Groupings

Country classifications used in this paper and reproduced below are those adopted by the Fund in December 1979 and used in International Financial Statistics during March 1980–May 1985, and in the World Economic Outlook, Occasional Paper No. 32, September 1984. Subsequently, the Fund adopted a new country classification which is described in the World Economic Outlook published in April 1985. The new classification has not been used in this paper because most of this paper’s statistical and analytical work was completed before the new system was adopted, and necessary historical data based on the revised classification were not available.15

Country Classification Used in the Present Study

Industrial countries








Germany, Federal Republic of







New Zealand





United Kingdom

United States

The developing countries are divided into two groups: oil exporting and non-oil countries.

Oil exporting developing countries



Iran, Islamic Republic of



Libyan Arab Jamahiriya




Saudi Arabia

United Arab Emirates


Non-oil developing countries and territories





Burkina Faso



Cape Verde

Central African Republic





Equatorial Guinea



Gambia, The




Ivory Coast










Mozambique, People’s Republic of




St. Helena

Sāo Tomé and




Sierra Leone


South Africa












American Samoa





China, People’s Republic of


French Polynesia

Hong Kong


Kampuchea, Democratic



Lao People’s Democratic Republic






New Caledonia


Papua New Guinea



Solomon Islands

Sri Lanka




Viet Nam

Western Samoa



Faeroe Islands









Middle East






Syrian Arab Republic

Yemen Arab Republic

Yemen, People’s Democratic Republic of

Western Hemisphere

Antigua and Barbuda








Cayman Islands



Costa Rica


Dominican Republic


El Salvador

Falkland Islands





Guiana, French








Netherlands Antilles





St. Christopher and Nevis

St. Lucia

St. Pierre and Miquelon

St. Vincent


Trinidad and Tobago


U.S. Virgin Islands

Apart from these classifications, the following groupings have been used in some of the tables in this paper.

Offshore centers in non-oil developing countries and territories



Cayman Islands

Hong Kong

Netherlands Antilles



Centrally planned economies




German Democratic Republic


Union of Soviet Socialist Republics

APPENDIX II Glossary of Selected Terms

Multilateral Bank Debt Restructuring

Bank advisory committees—also called coordinating committees, a limited number of banks designated by the authorities of a country to act on behalf of and as a liaison group with all bank creditors. Once an agreement is reached with the advisory committee it is then submitted for approval to all participating banks. Typically, membership of advisory committees is determined on the basis of banks’ exposure and to secure a regional balance. The bank with the largest exposure usually heads the committee, while member banks often act as regional coordinators.

Cofinancing—loans to developing countries made by commercial banks or other lending institutions in association with the World Bank and other multilateral development banks.

Concerted bank lending—refers to equiproportional increases in exposure to a restructuring country, coordinated by a bank advisory committee. There has generally been a close linkage between disbursements of concerted bank lending to a country and performance under a Fund-supported adjustment program.

Consolidation period—the period in which amortization payments to be rescheduled or refinanced under the terms of a restructuring agreement have fallen or will fall due.

Critical mass—a minimum amount of bank commitments to a new money package giving reasonable assurance to Fund management that the financing assumptions of an adjustment program are realistic and that the program can be submitted to the Fund Executive Board for approval.

Debt refinancing—either a rollover of maturing debt obligations or the conversion of existing or future debt-service payments into a new medium-term loan.

Debt rescheduling—formal deferment of debt-service payments with new maturities applying to the deferred amounts.

Debt restructurings—rescheduling or refinancing of debt-service payments in arrears and/or of future debt-service payments, undertaken in response to external payments difficulties.

Economic subcommittee—subcommittee of a bank advisory committee appointed to evaluate economic prospects of a restructuring country.

Events of default—any event which allows creditor banks to declare the outstanding principal, as well as all accrued interest, due and payable on demand.

Floating rate notes—unsecured notes paying interest at rates varying with the yield on a reference interest rate such as LIBOR.

LIBOR—London Interbank Offered Rate. The rate at which banks in London place Eurocurrencies with each other. It is frequently used in international loans as a reference rate.

Moratorium—an official declaration or decree by a government postponing all or certain types of maturing debt for a given period.

Multiyear restructuring agreement (MYRA)—Restructuring agreement where the consolidation period covers more than two years beyond the date of the signing of the agreement. These arrangements aim principally at eliminating a hump in scheduled amortization which may prevent a return to normal market access. In the context of MYRAs, banks have sought special monitoring procedures to seek to ensure that adequate financial policies would be followed once the restructuring country no longer is using Fund resources. As part of these special monitoring procedures some restructuring countries have requested that the Fund enhance its Article IV consultations.

Trade deposit facility—facility under which participating creditor banks make foreign exchange deposits at the central bank of the restructuring country. These deposits then may be withdrawn by these banks to finance specified foreign trade transactions.

Onlending—redesignation of credits originally granted to a government or central bank for general balance of payment purposes as loans to parastatals or private sector borrowers.

Redenomination clause—a clause which, in the context of a debt restructuring agreement, allows banks to redenominate their loans in their home currency. The agreement normally specifies the amount, timing, and currency eligibility of such redenomination as well as the applicable reference interest rates.

Standstill—an agreement between bank creditors and a government on a temporary deferment of amortization payments on long-term debt and on a freezing or rollover of short-term debt. Its principal objectives are to prevent a deterioration of the payments situation during the restructuring negotiation period and to preclude an uneven reduction in debt to some banks.

Multilateral Official Debt Restructuring

Agreed Minute—the terms agreed upon in a multilateral rescheduling meeting are embodied in an Agreed Minute of the meeting. The Minute provides guidelines for the debt relief that subsequently is arranged on a bilateral basis between the debtor and each creditor country. The Minute normally specifies the coverage of debt consolidated, the cutoff date, the consolidation period, the proportion of payments to be rescheduled, the provisions regarding the downpayment, and the repayment schedule for both the rescheduled and any deferred debt.

Arrears—unpaid amounts that fell due before the beginning of the consolidation period.

Bilateral agreements—agreements reached bilaterally between the debtor country and agencies in each of the participating creditor countries establishing the legal basis of the debt rescheduling as set forth in the Agreed Minute. Information on the terms of bilateral agreements is regarded as confidential. Bilateral agreements normally specify financial terms such as the interest rate on amounts rescheduled (moratorium interest), which is agreed bilaterally between the debtor and each creditor. Although the Agreed Minute now always refers to the interest rate being set on the basis of the market interest rate, in the past some Minutes had stipulated that each creditor country should make the maximum effort to keep the rate of interest as low as market conditions and legal considerations permit. The latter stipulation has not been made in more recent agreements as creditors have indicated their desire that the question of the interest rate be determined solely on a bilateral basis.

Bilateral deadline—the date by which the bilateral agreements must be concluded. The period for concluding bilateral agreements is now generally eight to nine months from the date of the Agreed Minute.

Conditional further rescheduling—refers to the provision in some Agreed Minutes setting forth the terms of rescheduling for payments that fall due in a specified subsequent future period and the conditions for such a rescheduling to become effective without a further Paris Club meeting.

Consolidation period—the period in which debt-service payments to be consolidated or rescheduled under the terms applicable to current maturities have fallen or will fall due. The beginning of the consolidation period may precede or coincide with the date of the Agreed Minute.

Current maturities—principal and interest payments falling due within the consolidation period.

Cutoff date—the date before which loans must have been contracted in order for their debt service to be eligible for consolidation.

“De minimis” clause—the provision whereby creditor countries whose claims eligible for rescheduling total to less than a specified amount are excluded from the rescheduling agreement. In the past, the de minimis amount was set at around SDR 1 million, but two thirds of the agreements in 1983 and 1984 provided for limits of SDR 500,000 or SDR 250,000. The debtor is expected to pay all claims excluded from the rescheduling by this clause as soon as possible and in any case by a specified date.

Down payment—in this paper, down payment refers to payments falling due within the consolidation period.

Effective rescheduling proportion—the proportion of total payments eligible for consolidation that are rescheduled or otherwise deferred until after the end of the consolidation period.

Goodwill clause—refers to the creditors’ willingness as expressed in the Agreed Minute to consider further debt relief in the future, subject to fulfillment by the debtor country of certain specified conditions.

Grace and maturity periods—in this paper, these periods are measured from the end of the consolidation period. The more recent practice of the Paris Club is to measure grace periods and maturities from a date six months after the midpoint of the consolidation period.

Initiative clause—the standard undertaking in the Agreed Minute that the debtor country will seek renegotiation of debts owed to other creditors on terms comparable to those outlined in the Agreed Minute. The clause appears as one of the general recommendations and reads:

  • “In order to secure comparable treatment of public and private external creditors on their debts, the Delegation of [debtor country] stated that their Government will seek to secure from external creditors, including banks and suppliers, rescheduling or refinancing arrangements on terms comparable to those set forth in this Agreed Minute for credits of comparable maturity, making sure to avoid inequity between different categories of creditors.”

Late interest charges—additional interest charges that may be levied as a result of obligations being overdue beyond a specified period. In some recent agreements, late interest charges have been listed specifically among debt service to be excluded from consolidation.

Maturity period—the grace period plus the repayment period.

Moratorium interest—interest on amounts deferred or rescheduled under the Agreed Minute.

Most-favored-nation clause—the standard undertaking in the Agreed Minute that the debtor country will accord to each of the participating creditor countries a treatment not less favorable than that which it may accord to any other creditor country for the consolidation of debts of a comparable term.

Previously rescheduled debt—debt service obligations arising from previous debt reschedulings.

Special account—an account established under some Agreed Minutes by the debtor country with the central bank of one of the participating creditor countries into which monthly deposits in an agreed amount are made. The total amount to be deposited usually approximates the amounts estimated to be payable to all participating creditors during the year; the debtor country would draw on the account as bilateral implementing agreements were signed and specific payments under these agreements became due.

APPENDIX III Nonguaranteed Suppliers

In general, two major creditor groups—commercial banks and official creditors—account for a preponderant share of a country’s debt service obligations that can be regarded as potentially eligible for rescheduling. Aside from these two creditor groups, a debtor country usually also has obligations to nonbank creditors abroad that are not covered by creditor country guarantees. These types of obligations do not come under the umbrella of any established multilateral debt rescheduling forum, and since they are mostly owed to nonfinancial companies and suppliers, they have been termed nonguaranteed suppliers’ credits.

This appendix provides supplementary material on recent experiences in dealing with nonguaranteed suppliers’ credits in cases where the debtor countries have obtained multilateral reschedulings of debt owed to other creditors. A broad description of the alternative approaches adopted by debtor countries is followed by a more detailed review of the experiences of Turkey (1980), Romania (1982), Mexico (1983), and Nigeria (1984).

Alternative Approaches

In the past, the question of whether it would be feasible or desirable for countries to restructure their debt service on nonguaranteed suppliers’ credits rarely arose. Recently, however, as countries’ overall debt-servicing difficulties have become more acute, the issue has become more relevant in the context of limited external financial resources and overall debt restructurings. On the basis of available information, some broad trends are discernible.16

About one third of the countries with recourse to bank and official multilateral debt reschedulings have found it practical for several reasons to remain current on obligations to nonguaranteed suppliers. Normally, the amounts involved are small, both in relation to amounts owed to the other main creditor groups and in relation to overall financing needs, and the administrative costs of setting up a framework to restructure such debt service could be so high as to outweigh the potential savings in foreign exchange. Also, it is generally considered difficult and time consuming to obtain an agreement that would be equally acceptable to a large number of small suppliers with diverse interests and relationships with domestic borrowers. Finally, and perhaps most significantly, importers tend to be willing to keep current on their obligations in order to preserve trade relationships and credit flows with traditional suppliers, since failure to remain current could lead to a reduction in trade credit or a substantial rise in import costs through higher markups, or even to a cutoff in the supply of essential goods.

Given the incentives for individual domestic borrowers to remain current on suppliers’ credits, it is not surprising that when alternatives to cash settlements have been officially adopted, domestic borrowers have often been provided with options to settle obligations to suppliers outside those arrangements. For example, in 1983 Mexican borrowers could have settled such obligations through a variety of options, including obtaining the needed foreign exchange through the free market as an alternative to the official scheme (see below). Moreover, even under a strict official rationing of foreign exchange, certain suppliers in privileged positions can continue to secure payments on schedule if domestic borrowers use the parallel exchange market. In some instances, the suppliers may succeed in settling the amounts owed by retaining export receipts of the borrowers held abroad.

When external payments arrears have accumulated, the debtor country may find it necessary to formalize the mechanism for an orderly settlement of arrears in order to restore the confidence of creditors. One approach has been to settle nonguaranteed suppliers’ credits as a part of an arrears reduction plan. When the debtor country has a stand-by arrangement with the Fund, it is a standard practice to agree on a schedule for reducing arrears (including arrears on debt service to nonguaranteed suppliers), with the target amounts for, and the phasing of such a reduction specified as performance criteria. Frequently, the plan is calculated on the basis of a projected foreign exchange budget, and priorities may vary among countries. This approach seems suited for countries with relatively small and manageable amounts of arrears; for others with large arrears, it is likely to be only a transitional measure.

For debtor countries faced with serious or prolonged debt-servicing difficulties and consequent erosion of creditors’ confidence, a systematic restructuring may eventually be needed instead of the more ad hoc approach described above. The choice of the frame-work for restructuring nonguaranteed suppliers’ credits, whether a series of bilateral negotiations or a broad-based multilateral discussion, depends on the amount involved, the composition and the number of creditors, and the degree of convergence among their interests. Some countries begin with attempts to negotiate bilaterally with their major suppliers, often with the aim of linking the terms to those obtained under bank or Paris Club restructurings.

Bilateral negotiations with key suppliers could prove most expedient if there are very few suppliers and they are similarly positioned in their relationships with the debtor country, and if the amounts involved are sufficiently large, such as major suppliers of petroleum and heavy capital equipment. In these instances, trade ties are normally quite well established, and prompt conclusion of agreements is in the mutual interest of both the importers and the creditors. Bilateral negotiations of this type are often not recorded, and thus information on the agreed terms and conditions is generally not publicly available.

As a next step, a broad-based multilateral rescheduling of nonguaranteed suppliers’ credits might be considered if arrears on these are very large, either in absolute terms or relative to arrears owed to other creditors. To date, there has been one publicized case of multilateral rescheduling of these obligations (see the section on Nigeria, 1984 below); a similar but less systematic attempt was also made by Romania (1982, see below). In the case of Nigeria, for the first time the creditors formed a steering committee to renegotiate collectively; this experience is being considered by a few other countries, such as Ivory Coast. The other reschedulings of suppliers’ credits have been undertaken unilaterally by the debtor countries and have been applied mainly to arrears (Costa Rica, Guatemala, Venezuela, and Turkey, 1980; and Mexico, 1983 below); the terms have varied from favorable for the nonguaranteed suppliers to stringent.

Although the details of specific arrangements vary, those unilateral approaches that have proved most workable have common features. First, the credits in question are usually already in arrears with unspecified or unknown original maturities, and the instruments for their rescheduled payment are usually issued by the central monetary authorities and are thus guaranteed by the debtor government. The instruments are either discountable or marketable, if not in the official market, then in a secondary market that is at least officially sanctioned. Second, the schemes are voluntary; domestic borrowers as well as foreign creditors are normally given the option to follow certain alternatives. Third, additional flexibility is usually provided in the form of options on terms or timing, for instance, through currency options and other provisions that allow for differences in exchange rate expectations. Creditors can therefore choose the combination suited to their interests and risk preferences. These features, especially those relating to flexibility, are thought to have helped ensure success for the plan adopted by Turkey (1980).

Concerning comparability of terms with other creditor groups, generalizations cannot be made since the available information is confined to a few cases and refers only to the terms and conditions that were officially offered. For example, in the case of Turkey, the terms received by nonguaranteed suppliers appear to have been less favorable than those agreed with the Paris Club or with banks; comparable official claims, for instance, were rescheduled over seven years compared with ten years for nonguaranteed suppliers’ claims. If account is also taken of likely discounts of the instruments in the secondary market, the terms eventually received by these suppliers were probably even less favorable than those officially offered. In the case of Mexico, the relatively rapid liquidation of unrescheduled arrears made it possible for the suppliers to receive terms that seem considerably more favorable than those agreed with official creditors—the maturity period was much shorter (under two years) and a much higher percentage was set as a down payment (50 percent within the first year of repayment).

Country Experiences

Turkey (1980)

The resolution of Turkey’s debt crisis that emerged in the late 1970s involved comprehensive restructuring arrangements with official creditors, commercial banks, and nonguaranteed private suppliers.17 After two successive multilateral debt renegotiations (conducted through an OECD consortium) in 1978–79, it became clear that a very large part of arrears outstanding at the beginning of 1980 was in fact owed to nonguaranteed suppliers (estimated at $1.4 billion, or some 70 percent of total trade arrears). A systematic restruc-turing of such nonguaranteed arrears was recognized as necessary in order to restore confidence and orderly trade finance. Accordingly, in January 1980, the Turkish authorities initiated a program of phased elimination of these arrears. After a slow start, the program was subsequently modified to enhance its acceptance by creditors.

The modified program had four main features. First, it contained currency options—creditors could reschedule their claims in terms of either Turkish lira or five other foreign currencies (U.S. dollars, deutsche marks, pounds sterling, French francs, and Swiss francs); claims in currencies other than the specified currencies were to be converted to one of the latter at the cross rates applied by the Central Bank of Turkey on January 25, 1980. Second, the program allowed for differentiated repayment terms by currency options—local currency obtained under the Turkish lira option could be used for extending credit to importers in Turkey, for payment of taxes, and for investment and equity participation in specified sectors; such investments could not be transferred abroad for at least five years. Under the Turkish lira option, conversion of claims for investment and for export production of up to $1 million would take place at a discount of 15 percent from the exchange rate prevailing at the time of settlement and for such claims exceeding $1 million at a discount of 10 percent.18 All other claims would be settled at a 33.3 percent discount on the exchange rate prevailing on January 25, 1980, the initial proclamation date of the program. Payments for claims of less than $10,000 would take place immediately; claims exceeding $10,000 were to be settled in two years in 12 equal bimonthly payments. Under the foreign currency option, 60 percent of each claim was to be settled in eight semiannual installments over four years, after a grace period of four years; the remaining 40 percent was to be repaid subsequently in four equal semiannual installments. The third feature was that the rates of interest applicable to the rescheduled foreign currency option claims were currency specific, 6 percent for claims in U.S. dollars, for instance, and 4 percent for deutsche marks. Finally, creditors had to inform the authorities of their choice of option within 90 days of the publication of the decree. Claimants choosing the foreign currency option were authorized to switch to the Turkish lira option, initially up to the end of 1981 and then up to June 30, 1982.

The response of creditors to the program was regarded as very favorable, in large part owing to the flexible elements of the program, in particular, the currency options and the repayment terms and interest rates that were currency specific. Furthermore, as the program advanced, data verification procedures in the Central Bank became more systematic and the program was increasingly better managed. Also, a secondary market had begun to develop where creditors could buy claims at a discount and, exercising the Turkish lira option, use the proceeds for local expenditure. As a result, an estimated 80 percent of eligible arrears were regularized within one year, with creditors exercising equally the foreign currency and the Turkish lira options, and by June 1982 all suppliers’ arrears had been eliminated.

Romania (1982)

Romania’s payments difficulties emerged in mid-1981, and in 1982 first the banks, then the Paris Club, rescheduled Romania’s obligations. The issue of comparable treatment vis-à-vis nonguaranteed suppliers arose in the restructuring discussions with banks, in which Romania undertook to obtain reschedulings on similar terms from foreign suppliers as well as Western official creditors, the International Bank for Economic Cooperation, the International Investment Bank, and some Middle Eastern central banks. The “Suppliers’ Arrears Programme” was specifically included in the bank restructuring agreement as one of the triggers which could require a prepayment of rescheduled bank debt. This program sought to ensure comparability of repayment terms by specifying, over the period in which amounts rescheduled by banks were to be repaid, a minimum path below which the stock of arrears owed to nonguaranteed suppliers was not permitted to fall.

Romania’s experience in attempting to reschedule nonguaranteed suppliers’ credits illustrates the type and range of problems involved in discussions that are not centralized and where creditors are not represented in a collective manner. First, there were practical and logistical difficulties created by the fact that over 2,000 suppliers with outstanding claims were potentially party to the negotiations. It was decided that the negotiating discussions should be confined to some 550 larger suppliers with claims greater than $50,000; this smaller group still proved unmanageable and it was time-consuming to verify the individual claims. As for the smaller suppliers with claims below $50,000, with the concurrence of the banks, it was agreed that a special account could be used to settle these obligations. Second, apart from these problems of logistics, there were fundamental difficulties that were not readily resolvable: individual creditors had widely diverse interests and strengths, and incentives existed for certain creditors in a dominant or privileged position to be accorded preferential treatment. With a wide divergence in negotiating strengths, suppliers made individual proposals containing varying terms and conditions which were difficult to reconcile.

By the end of an eight-month period, it proved difficult to ascertain the extent to which the final agreement was strictly consistent with the terms and conditions initially set under the “Arrears Programme.” Available information indicates that out of the initial estimated $1.3 billion reschedulable amount, only some $500 million may eventually have been rescheduled in this manner. This very substantial erosion in coverage was attributable to a number of factors, including cash payments to small suppliers, cash payments to the largest suppliers, and direct retention by some suppliers of export proceeds of Romania held abroad. Discussions to arrive at a mutually acceptable solution proved particularly difficult with a group of large suppliers to whom a relatively substantial amount was owed, and the authorities did not succeed in securing arrangements on terms (such as repayment periods) comparable to those with banks. Overall, arrangements were concluded with most suppliers by 1983, and the Romanian authorities were able to make down payments which in the aggregate were equivalent to no more than 20 percent of unpaid suppliers’ credits, hence broadly consistent with the provision of the banks’ agreement.

Mexico (1983)

The major part of Mexico’s debt restructuring efforts since the liquidity crisis in August 1982 has been directed toward the commercial banks—the predominant group of creditors. As regards official creditors, in June 1983 an agreement was reached to reschedule debt of the Mexican private sector, in arrears on June 30, 1983 or falling due through December 31, 1983, that was owed to or guaranteed by official creditors. In the case of the nonguaranteed suppliers, debt owed by the Mexican private sector was rescheduled in 1983 under the Foreign Exchange Risk Coverage Trust Fund (FICORCA). This fund was established in 1983, first to assist the private sector to settle payments arrears to foreign suppliers, and second to provide a framework for the refinancing and forward exchange coverage of the private sector’s external debt.

In February 1983 the Bank of Mexico established a facility to permit the settlement of arrears of the Mexican private sector to foreign suppliers outstanding as of December 20, 1982 and of payments due before June 30, 1983; a similar facility was again established in August 1983 to settle obligations due between July 1 and December 19, 1983. By depositing with FICORCA the peso equivalent of payments due, private debtors were guaranteed the peso-U.S. dollar rate in the controlled market on the deposit date. If the foreign creditor agreed to be paid by the transfer of these deposits to his name, FICORCA agreed to make the foreign exchange available to the foreign creditor according to a schedule of payments to be announced later. Alternatively, domestic borrowers were allowed to settle arrears through the free market or to enter a queue to obtain foreign exchange from the Bank of Mexico at the controlled exchange rate. In the case of exporters, they were allowed to allocate up to 20 percent of their export receipts to service outstanding obligations abroad, or up to 100 percent of receipts from new exports approved under special export agreements with the Government.

Repayment schedules under the deposit scheme were announced in August and November 1983 as follows:

  • For the February 1983 scheme, covering obligations due through the end of June 1983, 50 percent of the principal and accrued interest would be paid in September 1983, provided that deposit rights were transferred to foreign creditors no later than August 15, 1983. The balance would be repaid in March 1984 for obligations registered before February 15, 1984, and in March 1985 for any remaining obligations.

  • For the August 1983 scheme, covering obligations due between July 1 and December 19, 1983, payments would be made in full in March 1984, provided that deposit rights were transferred to creditors by January 31, 1984. By early 1984, a total of $500 million in private sector arrears to foreign suppliers had been identified under these two schemes, of which $200 million were settled in 1983 and the balance paid by March 1984.

Under the official creditor group’s Agreed Minute of June 23, 1983, arrears, including on short-term debt, were to be repaid as follows: 5 percent in 1983, 5 percent in 1984, 30 percent in 1985, and the remaining 60 percent in 1986. For medium-term and long-term obligations falling due between July and December 1983, 10 percent was to be repaid at maturity and the remaining 90 percent in semiannual payments starting in December 1986 and concluding in June 1989.

A restructuring of the external debt of the Mexican private sector has also been encouraged, in order to ease the pressure on Mexican firms resulting from the depreciation of the peso in 1982. To facilitate such restructuring, a scheme was developed under FICORCA whereby firms with obligations outstanding as of December 20, 1982 and whose debt was refinanced at specified minimum terms were permitted to obtain forward exchange cover in order to spread the exchange losses over the new maturity period of the restructured loan.

A Mexican debtor had the option of continuing to pay interest and thus seek cover only for principal payments, or of covering fully the servicing of the obligations. Under each of these two options, the debtor also had the alternatives of cash or credit settlements. Under the option of covering principal payments only, a debtor willing to deposit with FICORCA the total peso equivalent of the obligation due abroad would be able to convert these pesos at a more appreciated rate than the one prevailing in the controlled market, with the rate varying according to the maturity of the restructured loan—larger discounts were provided for longer maturities. Under the second option, where the debtor obtained coverage of interest payments due abroad as well, the conversion would be made at the controlled rate prevailing on the date the deposit was constituted.

To be eligible for this scheme, the rescheduling had to be for at least six years, with a three-year grace period, if the coverage sought was only against principal; the rescheduling had to be for eight years, with a four-year grace period, if both principal and interest payments due abroad were to be covered. The forward cover scheme does not transfer either the obligation or the commercial risk to FICORCA, since the domestic borrower remains responsible for the servicing of the debt to the foreign creditor for the entire life of the rescheduled loan. Prior agreement between borrower and foreign lender is required for the coverage to become effective.

The deadline for registering private debt restructuring operations under FICORCA was initially programmed to lapse on October 25, 1983 but was extended to November 5, 1983. As of that time, some $11.6 billion had been registered under the various options available. The bulk of these operations—94 percent of the total—included the provision of forward exchange coverage by FICORCA of both principal and interest payments, as well as financing by FICORCA of the peso deposit constituted by the debtor. Only 2 percent of the total entailed the payment in cash of the obligations at the current or discounted rate.

Nigeria (1984)

Nigeria’s difficult payments situation was reflected primarily in a sharp accumulation of trade arrears beginning in 1982. By early 1984, it was estimated that outstanding trade arrears (owed by both the public and private sectors) amounted to some $5.8 billion, of which at least $1.7 billion was owed to or guaranteed by official creditors and the remainder to private nonguaranteed suppliers, largely on intercompany open accounts. Accordingly, in early 1984 Nigeria requested its suppliers to assist in resolving the trade arrears problem in order to restore normal trading relationships. The initial proposal made by Nigeria was criticized by the uninsured suppliers primarily on the grounds that the terms were less favorable than those already accorded to the commercial banks for the 1982 and 1983 refinancing of arrears on letters of credit. In response to this initial proposal, in January 1984, a trade creditor group of some 350 suppliers was formed to secure a mutually satisfactory basis for the settlement of arrears; the group was owed more than $2 billion, with claims in arrears on average by 18 months. Members of the trade creditor group were from some 20 countries, and consisted of five different types of companies: major international trading companies with very large Nigerian exposures; major corporations with exposures that were small relative to their balance sheets but large in absolute terms; commodity trading houses with substantial exposures; major international construction companies; and a large number of small exporters whose exposures were large relative to their balance sheet and who in the aggregate represented a significant share of total arrears.

The trade creditor group established a steering committee that reflected both the geographic pattern of membership and the nature of the companies involved, and an investment banking firm was appointed by the steering committee to act as banking advisor. Agreement was reached relatively promptly in April 1984 on a rescheduling of short-term trade arrears outstanding at the end of 1983 over a six-year period including two-and-a-half years’ grace, in which all creditors (insured in creditor country or uninsured) were to be treated uniformly. In the case of uninsured creditors, the proposed refinancing mechanism was that the Central Bank would issue promissory notes under the guarantee of the Federal Government in settlement of agreed uninsured trade and other debt owed by Nigerian importers. The notes would be once discountable and would carry an interest rate of LIBOR plus 1 percent from January 1, 1984. After completion of time-consuming verification procedures, promissory notes have been issued under the agreement as envisaged.

As regards trade arrears owed to or with guarantee of official creditors, in 1984 Nigeria also initiated informal discussions with certain export credit agencies and government departments of its major trading partners to discuss the same proposal that was agreed to by the nonguaranteed suppliers. While creditor governments have indicated their willingness to reschedule arrears on a multilaterally negotiated basis, subject to the existence of an upper credit tranche arrangement with the Fund, they also indicated that they could not accept promissory notes implying a rescheduling scheme that has not been multilaterally negotiated. Since the Nigerian proposal attempted to preserve comparable treatment among creditors, and in order to ensure that payments on interest in the interim period are made to the appropriate creditors before the multilateral rescheduling actually takes place, a contact group was set up by official creditors to discuss technicalities and to agree on a mechanism to restore interim payments. It was emphasized that the mechanism and the related payments would in no way imply or prejudge the terms and conditions of any eventual official multilateral, and implementing bilateral, rescheduling agreements, especially as regards the amounts to be rescheduled, the currencies to be used, and the interest rate.

APPENDIX IV Statistical Tables

Table 5.

International Lending to Developing Countries Through Banks and Bond Markets, 1973–841

(In billions of U.S. dollars, unless otherwise indicated)

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Sources: Bank for International Settlements (BIS); Organization for Economic Cooperation and Development; International Monetary Fund, International Financial Statistics; World Economic Outlook, April 1985: A Survey by the Staff of the International Monetary Fund (Washington); and Fund staff estimates.

Cross-border lending to developing countries and to non-oil developing countries excludes the seven offshore centers: the Bahamas, Bahrain, the Cayman Islands, Hong Kong, the Netherlands Antilles, Panama, and Singapore.

Unadjusted for redemptions and double counting due to bank purchases of bonds.

IMF-based data on cross-border lending by banks are derived from the Fund’s International Banking Statistics (tables on cross-border interbank accounts by residence of borrowing bank plus international bank credits to nonbanks by residence of borrower), excluding changes attributed to exchange rate movements. BIS-based data are derived from quarterly statistics contained in the BIS International Banking Developments; the figures shown are adjusted for the effects of exchange rate movements from 1977. The differences between the IMF data and the BIS data are mainly accounted for by the different coverages of the series. The BIS data are derived from geographical analyses provided by banks in the BIS reporting area. The IMF data derive cross-border interbank positions from the regular money and banking data supplied by member countries. Moreover, the IMF analysis of transactions with nonbanks is based on data from geographical breakdowns provided by the BIS reporting countries and additional banking centers.

Table 6.

Cross-Border Interbank Lending and Deposit Taking, 1982–841

(Changes, in billions of U.S. dollars)

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Sources: International Monetary Fund Statistics (IFS); and Fund staff estimates.

Data on cross-border lending and deposit taking are derived from stock data on the reporting countries’ liabilities and assets, after allowing for exchange rate movements. U.S. data are not corrected for valuation changes attributed to exchange rate movements; developing country data exclude offshore centers (the Bahamas, Bahrain, the Cayman Islands, Hong Kong, the Netherlands Antilles, Panama, and Singapore); “other transactors” are trans-actors included in IFS measures for the world, to enhance global symmetry, but excluded from IFS measures for all countries (for cross-border interbank accounts, comprises changes in accounts of the Bank for International Settlements with banks other than central banks; and changes in identified cross-border bank accounts of centrally planned economies (excluding Fund members); while net errors and omissions are the difference between global measures of cross-border interbank lending and deposit taking. Details may not add owing to rounding.

As measured by differences in the outstanding liabilities of borrowing countries, defined as cross-border interbank acounts by residence of borrowing bank.

As measured by differences in the outstanding assets of depositing countries, defined as cross-border interbank accounts by residence of lending banks.

Lending to minus deposit taking from.

Calculated as the difference between global measures of cross-border interbank lending and deposit taking.

Table 7.

International Bank Lending to Nonbanks and Deposit Taking from Nonbanks, 1982–841

(Changes, in billions of U.S. dollars)

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Sources: International Monetary Fund, International Financial Statistics (IFS); and Fund staff estimates.

Data on cross-border lending and deposit taking are derived from stock data on the reporting countries’ liabilities and assets, after allowing for exchange rate movements. U.S. data are not corrected for valuation changes attributed to exchange rate movements; developing country figures exclude offshore centers (the Bahamas, Bahrain, the Cayman Islands, Hong Kong, the Netherlands Antilles, Panama, and Singapore); other transactors are included in IFS measures for the world, to enhance global symmetry, but excluded from IFS measures for “all countries” (the data comprise changes in accounts of international organizations other than the Bank for International Settlements with banks, and changes in identified cross-border bank accounts of nonbanks in centrally planned economies); while “unidentified” data are the differences between the amounts that countries report as their banks’ positions with nonresident nonbanks in their monetary statistics and the amounts that banks in major financial centers report as their positions with nonbanks in each country. Details may not add to totals, owing to rounding.

Measured by differences in the outstanding liabilities of borrowing countries, defined as cross-border bank credit to nonbanks by residence of borrower.

Measured by differences in the outstanding assets of depositing countries, defined as international bank deposits by nonbanks by residence of depositor.

Lending to minus deposit taking from.

Table 8.

Cross-Country Comparison of Components of External Assets and Liabilities, December 1984

(In billions of U.S. dollars)

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Sources: International Monetary Fund, International Financial Statistics; and Fund staff estimates.

Includes Canada, France, Federal Republic of Germany, Italy, Japan, United Kingdom, and the United States.

Excludes Fund member countries.

The Bahamas, Bahrain, the Cayman Islands, Hong Kong, the Netherlands Antilles, Panama, and Singapore.

Excludes the seven offshore centers.

Table 9.

Bank Debt of Selected Developing Countries, December 19841

(In billions of U.S. dollars)

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Source: International Monetary Fund, International Financial Statistics.

Debt is calculated as the sum of cross-border interbank accounts (CBIA) by residence of borrowing bank and international bank credit to nonbanks by residence of borrower. As of the end of December 1984 unless otherwise noted.

Latest published data for CBIA are as of end of September 1982.

Latest published data for CBIA are as of end of September 1984.

Latest published data for CBIA are a Fund staff estimate.

No CBIA data are available.

Latest published data for cross-border interbank accounts are as of June 1984.

Data deficiencies may have led to a degree of overstatement in these figures, which are subject to revision.

Latest published data for CBIA are as of end of December 1983.

Latest published data for CBIA are as of end of December 1982.

Latest published data for CBIA are as of end of December 1981.

Latest published data for CBIA are as of end of March 1984.

Latest published data for CBIA are as of end of March 1982.

Latest published data for CBIA are as of end of September 1983.

Table 10.

International Bond Issues and Placements, 1978–841

(In millions of U.S. dollars)

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Source: Organization for Economic Cooperation and Development, Financial Statistics Monthly.

For details on country classifications, see Appendix I.

Excluding Fund member countries.

International bonds comprise foreign bonds and Eurobonds.

Table 11.

Bank Debt Falling Due in the Next Year as a Percentage of Total Bank Debt, 1978–841

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Source: Calculations based on data from the Bank for International Settlements, The Maturity Distribution of International Bank Lending.

Expressed in median ratios, except where otherwise specified.

The term “restructuring” covers rescheduling, and also refinancing when undertaken to ease countries’ external payments difficulties.

The sample size of two countries makes the median concept inapplicable.

Table 12.

Bank Debt Falling Due in the Next Year as a Ratio of Total Claims on Banks, 1978–831

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Source: Calculations based on data from the Bank for International Settlements, The Maturity Distribution of International Bank Lending.

Expressed in median ratios, except where otherwise specified.

The term “restructuring” covers rescheduling, and also refinancing when undertaken to ease countries’ external payments difficulties.

The sample size of two countries makes the median concept inapplicable.

Table 13.

Undisbursed Commitments as a Percentage of Total Bank Debt, 1978–841

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Source: Calculations based on data from the Bank for International Settlements, The Maturity Distribution of International Bank Lending.

Expressed in median ratios, except where otherwise specified.

Mean value.

The term “restructuring” covers rescheduling, and also refinancing when undertaken to ease countries’ external payments difficulties.

The sample size of two countries makes the median concept inapplicable.

Table 14.

Capital-Asset Ratios of Banks in Selected Industrial Countries, 1977–831

(In percent)

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Sources: Fund staff calculations based on data from official sources, as indicated in footnotes.

Given inconsistency in the accounting of bank assets and capital across banks and over time, aggregate figures such as the ones in this table must be interpreted with caution.

Ratio of equity plus accumulated appropriations for losses (beginning with 1981, appropriations for contingencies) to total assets (Bank of Canada Review).

The changeover to consolidated reporting from November 1, 1981 had the statistical effect of increasing the aggregate capital-asset ratio by about 7 percent.

Ratio of reserves plus capital, to total assets excludes cooperative and mutual banks (Commission de Controle des Banques, Rapport).

Ratio of capital including published reserves to total assets (Deutsche Bundesbank, Monthly Report).

Ratio of reserves for possible loan losses, specified reserves, share capital, legal reserves plus surplus and profits and losses for the term to total assets (Bank of Japan, Economics Statistics Monthly).

Ratio of capital resources (share capital, reserves excluding current year profits, general provisions, and eligible subordinated loans) to total payables. Eligible subordinated loans are subject to prior authorization by the Institut Monetaire Luxembourgeois and may not exceed 50 percent of a bank’s share capital and reserves. Data in the table are compiled on a nonconsolidated basis, and as a weighted average of all banks (excluding foreign bank branches). An arithmetic mean for 1983 would show a ratio of 7.58 percent. Inclusion of current year profits in banks’ capital resources would result in a weighted average of 3.91 percent for 1983. Provisions for country risks, which are excluded from capital resources, have been considerably increased in the last three years, including an approximate doubling of the level of provisions in 1983.

Ratio of capital, disclosed free reserves, and subordinated loans to total assets. Eligible liabilities of business members of the agricultural credit institutions are not included (De Nederlandsche Bank N.V., Annual Report).

Ratio of capital plus reserves to total assets (Swiss National Bank, Monthly Report).

Ratio of share capital and reserves, plus minority interests but excluding loan capital, to total assets (Bank of England).

Ratio of capital and other funds (sterling and other currency liabilities) to total assets (Bank of England). Note that these figures include U.K. branches of foreign banks, which normally have little capital in the United Kingdom.

Ratio of total capital to total assets.

Reporting banks as defined in the Country Exposure Lending Survey, Federal Financial Institutions Examination Council.

Table 15.

Concerted Lending: Commitments and Disbursements, 1983–841

(In millions of U.S. dollars)

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Source: Table 17.

These data exclude bridging loans.

Agreed in principle with Steering Committee.

Signed on February 27, 1985.

Disbursement corresponding to the 1983 commitments.

Table 16.

Short-Term Debt Rolled Over or Converted Into Medium-Term Loans, 1983–84

(In millions of U.S. dollars)

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Source: Table 17.

Preliminary estimate.

Converted into long-term debt.

This amount represented the limit commitments for the trade related credit lines.

Outstanding amount on March 7, 1983.

Outstanding amount on March 6, 1984.

Table 17.

Terms and Conditions of Bank Debt Restructurings and Bank Financial Packages, 1978–June 1985

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Sources: Restructuring agreements; press reports; and Fund staff calculations.

An agreement in principle to reschedule arrears at the end of 1982 and public debt falling due in 1983 was reached in January 1983, but the new government requested a renegotiation of this agreement.

The cumulative loan disbursements could never exceed $1.1 billion per annum.

The agreement also provided that: the $750 million outstanding under the 1982 bridge loan would be repaid in early 1985 on the date of the first borrowing under the new loan; Argentina would pay at least $750 million before the end of 1984 to reduce interest arrears on Argentine public sector indebtedness; interest arrears on public sector indebtedness would be brought current during the first half of 1985; and that foreign exchange would be made available to private sector borrowers so that interest on Argentine private sector indebtedness can be brought current during the first half of 1985.

Bolivia made payments of 10 percent of the amount to be consolidated until early September 1982. Since then, no more payments were made and the refinancing agreement on the April 1982–March 1983 maturities did not take effect.

The agreement would be finalized, subject to: payment of interest arrears according to the schedule agreed on in March; the payment of the existing arrears on the 10 percent of principal due on the basis of the 1981 agreement; and the reaching of an agreement with the Fund. Since Bolivia was unable to make the final payment of $30 million in interest arrears by September 1983 as agreed, an interim agreement was reached with the banks in which Bolivia made a good faith deposit of $3 million and agreed to repay $30 million in monthly installments of $7.5 million each between October 1983 and January 1984. In return the banks agreed to extend the standstill agreement on repayments and regular maturities falling due after April 1, 1983 without penalty payments until January 31, 1984. After the expiration of the interim plan, Bolivia made two more payments of $7.5 million each in February and March 1984. On May 30, 1984, the Bolivian Government announced a temporary suspension of all foreign debt payment to private banks. On November 2, 1984 the Government renewed Bolivia’s request for a contractual arrangement to postpone all debt service to banks until the end of 1985.

On arrears as of June 5, 1983. $28 million of arrears on interest payments were paid by April 5, 1983. The remainder was divided into five monthly payments.

Latest estimate of amount subject to rescheduling. Total may be lower, as some of Brazil’s debt to banks and suppliers may be eligible for rescheduling through Paris Club. A definitive accounting of Paris Club rescheduling will be available upon termination of bilateral agreements. In addition, trade financing was maintained at approximately $9.8 billion and interbank exposure was restored to $6 billion.

First principal payment due 30 months after rescheduling.

The spreads over LIBOR/U.S. prime rate are 2⅛ percent/1⅞ percent for amounts on deposit with the Central Bank or—as generally acceptable maximums—for loans to public sector borrowers with official guarantee, Petrobras, and Companhia Vale do Rico Doce (CVRD); 2¼ percent/2 percent as the generally acceptable maximums for public sector borrowers without official guarantee, private sector borrowers with development bank guarantee and for commercial and investment banks under Resolution 63;2¼ percent/2¼ percent as generally acceptable maximums for private sector borrowers.

The Central Bank stands ready to borrow the committed funds at either 2Vfc percent over LIBOR or 1⅞ percent over U.S. prime rate. For loans to other borrowers, the spreads agreed must be acceptable to the Central Bank, which indicated the following maximums for spreads over LIBOR to be generally acceptable (spreads over U.S. prime rate in parentheses): public sector borrowers with official guarantee as well as Petrobras and CVRD—2⅛ percent (l⅞ percent); public sector borrowers without official guarantee, private sector borrowers with development bank guarantee, and Resolution 63 loans to commercial and investment banks—2¼ percent (2 percent); private sector borrowers, including multinationals—2½ percent (2½ percent). Brazil is also prepared to pay a 0.5 percent commitment fee on undisbursed commitments, payable quarterly in arrears, and a 1.5 percent flat facility fee on amounts disbursed, payable at the time of disbursement.

Certain payments are to be made during 1985–93 for amounts falling due during that period.

Refers to those certificates which were issued by the Central Bank against existing arrears of the private sector (mainly with regard to imports) and which were held by the foreign commercial banks.

The banks agreed to provide Costa Rica with a revolving trade related credit facility equivalent to 50 percent of interest payments actually paid in 1983, which were either in arrears or had accrued in 1983.

These are 1⅝ percent over “domestic reference rate,” equal to: U.S. dollar C/D rate adjusted to reserves and insurance; or a comparable yield for loans denominated in other currencies.

Payments of 100 percent of the maturities falling due were deferred until December 31, 1984, when 90 percent of the amount was refinanced.

In June 1982, banks indicated their intention to negotiate a refinancing agreement to convert the principal repayment into a longer-term loan prior to January 31, 1983, conditional upon successful completion of negotiations for an upper credit tranche program with the Fund. As negotiations with the Fund have not yet been completed, further deferments under the same conditions were agreed in July 1983 and January 1984.

Agreement in principle was tentatively reached in early 1983.

Original proposals were for repayments to start in March 1984, for the maturity due in 1983 and in March 1985, for the maturities due in 1984, but no agreement has yet been reached.

The agreement covers all regularly scheduled maturities on debt incurred prior to November 30, 1982 by certain public entities; none of these refinanced maturities occurs after 1989.

Conditional upon stabilization program acceptable to the banks.

A down payment of $3 million has to be paid in 1987.

Grace period and maturity were measured from the date of the first disbursement of the refinancing loan.

The rescheduled amounts were rolled over on a short-term basis and were converted into medium-term loans on April 1, 1980 and on April 1, 1981 for the 1979/80 and 1980/81 reschedulings, respectively.

Also, the bank that was owed most of the arrears informally agreed to allow Liberia to repay the arrears in 12 monthly installments.