Ldc Debt: The Role Of The International Monetary Fund

For a combination of reasons that differ among countries, many developing countries' foreign debt service obligations have become difficult to meet. The size of the problem in 1982 raised concern over the stability of the banking system. The International Monetary Fund (IMF) provided the forum through which the international community's strategy for meeting this concern has evolved. The IMF also played, and continues to play, an active role in helping to finance the structural and balance‐of‐payments adjustments needed in countries with debt service problems. The IMF's involvement is an integral part of the broader strategy, which builds on the cooperation of debtors and creditors, on a case‐by‐case basis. The objective is to share the burden in a balanced way. Obtaining adequate adjustment in deficit countries is central to the strategy, but the Baker Plan increased the emphasis on restoring longer‐term growth through more far‐reaching structural adjustments supported by longer‐term financing. The IMF has modified and enhanced some of its lending facilities in light of this emphasis. However, though the short‐term nature of its lending was critical in averting a possible banking crisis during 1982 and 1983, it diminishes somewhat the IMF's role in financing the more protracted adjustments now required.