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The Debt Crisis and the World Economy

Report by a Commonwealth Group of Experts

image of The Debt Crisis and the World Economy
‘The message is clear. The present situation is not sustainable. The world’s financial safety is balanced on a knife-edge... There is no room for complacency. We sense rather that a recognition of the gravity of the issues and of the dangers posed by the debt crisis in an interdependent world is growing. Full expression is not always given to this recognition, perhaps because of fear seeming to aggravate matters. But the situation has now been reached where collective determination to take action is imperative. The knowledge that such determination has been mustered will itself be a factor for greater sustainability.’ – From the Report.



‘The capacity of developing countries to comply with demands by the IMF and banks for austerity measures has political limits. In the final analysis, these limits are represented by unrest and the threat of revolution. Before that point is reached, debtor countries will obviously refuse to meet the terms and conditions of contraction demanded of them; there is growing evidence that that point is fast approaching.’ – From the Foreword by Commonwealth Secretary-General Shridath Ramphal.

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Making Developing Country Debt Manageable

Until 1974, governments and public institutions were the main providers of foreign capital to the developing countries. It was generally accepted that finance was required on terms which explicitly recognised the special economic and political problems of the developing countries and that many of them would be unable to meet interest obligations, or repay principal, within a commercial time horizon. The increase in oil price in 1973-74, while obviously diminishing the creditworthiness of the oil-importing developing countries, produced an urgent need for increased finance.

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