The World Bank and the Analysis of the International Debt Crisis (original) (raw)

Debt and International Organizations

Oxford Research Encyclopedia of International Studies, 2021

International financial organizations that lend to developing countries are the subject of controversy. Their functions, structures and effectiveness have generated important debates across disciplines, analysts and positions on the ideological-political spectrum. What interests and logic motivate the international financial institutions' (IFIs) loans? Following an international political economy perspective and mainly based on the literature produced in the early 21st century, we analyze the role played by three variables: the geopolitical and financial interests of powerful global actors, institutional and bureaucratic logic, and the borrower's interest and domestic policy. These three variables interact and influence the financial decisions made by the International Monetary Fund (IMF), the World Bank, and the major regional development banks (the Inter-American Development Bank [IADB], Asian Development Bank [AsDB], and African Development Bank [AfDB]). On the other hand, what are the main economic and political effects in the recipient countries? The IMF's credit tackles balance-of-payments crises mainly through adjusting domestic output and consumption, which usually has negative social costs. Development bank lending has diverse effects. Although it tends to boost growth and strengthen domestic accountability, it does not always guarantee the attainment of development goals. In this sense, the literature has found negative impacts on labor rights and forestry, while improvements in health and education cannot always be sustained in the long run.

Developing Country Debt Crises, International Financial Institutions, and International Law: Some Preliminary Thoughts

While the question of how effectively the IFIs have performed their international economic, financial, social, environmental and developmental responsibilities in their work with these debtor countries has been extensively analyzed and debated, their compliance with their applicable international legal obligations has been less examined. The IFIs' responsibility in this regard, is based on their mandates, as defined in their Articles of Agreements, and general principles of customary international law. Their customary international legal obligations include upholding such principles as pacta sunt servanda and rebus sic stantibus and respecting the sovereignty of their member states. The thesis of this paper is that, when measured against these legal standards, the IFIs record in dealing with sovereign debtors in difficulty during 1982-2007 is mixed. They made effective use of the principles of pacta sunt servanda and rebus sic stantibus to influence the course of the negotiation...

The Political Economy of International Debt and Third World Development

African Social Science Review, 2000

This article examines the causes and implications ofthe international debt crisis. It begins by first defining the debt crisis and offers some basic explanations for the crisis. The analysis examines the costs ofthe debt crisis and develops some basic explanations for the crisis. It explores the same conditions in both the North and South countries. Also, the article addresses the role of international finanCial institutions, and pays some close attention to the problems ofinternationalfinancial establishments in the 1980s. Finally, it reviews some general solutions to the debt crisis and provides some tentative suggestions for future considerations.

The Developing Country Debt Crisis

1988

This paper raises several cautionary notes regarding high-condition-ality lending by the International Monetary Fund and the World Bank in the context of international debt crisis. It is argued that the role for high-conditionality lending is more restricted than generally believed, because enforcement of conditionality is rather weak. Moreover, the incentives for a country to abide by conditionality terms are also likely to be reduced by a large overhang of external indebtedness. Given the limited ability to enforce conditionality agreements, nodesty and realism should be a cornerstone of each program. The experience with conditionality suggests two major lessons for the design of high-condition-ality lending. First, debt forgiveness rather than mere debt rescheduling may increase a debtor country's compliance with conditionality, and thereby increase the actual stream of repayments by the indebted countries. Second, given the complexity of the needed adjustments, and the diff...

Debt crises, political change and the state in the developing world

2006

Dealing with increasing foreign debt has become a key part of government strategy across the developing world, particularly in wake of the payment crises that have shaken south-east Asia, Latin America, Turkey and Russia over the past decade. This working paper seeks to analyze how the political systems in these countries have adapted to the grave problems created by unpayable debt, examining in the process the structure of modern global finance, the history of the state in the developing world, and the demands placed upon governments by sudden rises in poverty and general economic turmoil. Focusing on case-studies of Argentina, Indonesia and Zambia, the paper unpicks the dynamics of these crises, suggesting that certain states have managed to strengthen their freedom of action and authority by recasting their relations with the public at home and with foreign lenders.

The World Bank in the Post-Structural Adjustment Era

Handbook of Global Economic Governance: Players, Power and Paradigms, 2014

Originally created as part of a global financial architecture aimed at reducing the likelihood of global economic crisis and now situated as the preeminent institution in the broad international development community, the World Bank has witnessed tremendous transformation of its mission, structure and operations over its 65-year existence. In this chapter, we focus on the World Bank as a lender of international development funds. We first briefly describe some of the major transformations that the Bank underwent through the mid-1990s in order to set up an extended discussion of the incorporation of the 'governance and anticorruption' (GAC) agenda into the World Bank's lending operations. We show how the GAC agenda emerged as the product of crises of legitimacy and effectiveness linked to the failures of structural adjustment lending during the 1980s and early 1990s. We argue that the GAC agenda remains ill defined almost 20 years after its emergence, for three fundamental reasons: (1) the challenges of creating better governing institutions in the developing world; (2) the disbursement culture that drives bureaucratic decisions within the Bank; and (3) the question of to which constituencies the Bank should be responsive.

The debt crisis: a re-appraisal

2005

The 1980s' debt crisis is a landmark in developing economies' growth and stabilization. According to the most quoted empirical articles, external shocks and vicissitudes gave rise to crisis just because of delays in stabilization policies, engendered by internal conflicts and institutional immaturity. I review some of these papers, and find out some problems -in the measurement of shocks and foreign indebtedness, namely -whose corrections lead to opposite results: external shocks and foreign indebtedness explain that crisis regardless of domestic policies. At the same time, the strong correlation of income distribution to terms of trade changes and foreign indebtedness suggest that inequality may have contributed differently to that crisis: either through an economic channel, or through a political channel based on delays in reforms.

Protecting the poor : global financial institutions and the vulnerability of low-income countries

2005

Forum on Debt and Development (FONDAD) FONDAD is an independent policy research centre and forum for international discussion established in the Netherlands. Supported by a worldwide network of experts, it provides policy-oriented research on a range of North-South problems, with particular emphasis on international financial issues. Through research, seminars and publications, FONDAD aims to provide factual background information and practical strategies for policymakers and other interested groups in industrial, developing and transition countries.

Whose Debt is it Anyway? A Sustainable Route Out of the Crisis for Low-income Countries

2021

The public debt of low-income countries is increasing significantly, with the ratio of public debt service costs to government tax revenue likely to exceed 30% in a third of low-income countries. This could reduce their ability to respond to the COVID-19 pandemic, and to lead an economic recovery that responds to climate change and supports the Sustainable Development Goals. Rapid and sufficient international debt relief for countries that need it is therefore an urgent priority. This needs to take into account the changed structure of debt and the diversity of lenders. An important change in the structure of this debt is that both Chinese and private creditors, especially bondholders, have rapidly increased their share of credit to emerging economies. This paper analyses the extent of the growing debt crisis in low-income economies-particularly in Africa, its complex and diverse nature, and the implications for international debt relief efforts. www.iied.org IIED ISSuE pApER Contents Summary 4 1 The current context of public external debt in the developing world 5 1.1 African debt 6 1.2 Overall debt situation of low-income countries in sub-Saharan Africa 8 2 Detailed analysis of scale and complexity of LICs' external public debt 9 2.1 public debt by income category 12 2.2 Evolution of LICs' external debt 12 2.3 The time horizon of external debt 14 2.4 Countries and international institutions that are major creditors of LICs 16 2.5 The role of international bondholders in recent years 2.6 The role of rating agencies 3 Looking forward References Appendix Endnotes Abbreviations and acronyms Whose debt is it anyWay? | A sustAinAble route out of the crisis for low-income countries 4 www.iied.org