The LDC debt crisis

Quarterly Bulletin 1991 Q4
Published on 01 December 1991

This article examines the evolution of the less developed countries' (LDCs) debt problem over the past decade. It outlines the institutional framework for dealing with debt servicing difficulties; and describes the economic background to the problem and the different stages in the strategy. It is clear that the threat at one time posed to the international financial system has now receded. Rec ently, increasing emphasis has been given to debt reduction by both banks and official creditors as a catalyst for economic reform. The strategy of market-based debt reduction by banks appears to be having some success in some middle income countries and debt indicators have begun to improve. The plight of the poorest countries remains as serious as ever, however, and the main industrial countries have committed themselves to further debt relief.

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