1987

It is argued that 1987 marked a largely silent, unnoticed turning point in the debt crisis, which opened the way to its long overdue resolution after 1989. Early that year, to start with, the IMF staff endorsed, beyond closed doors, the notion of a ‘debt overhang’, hence the principle of write-offs. It was censured by the US Executive Director, but the point had been made. Several archival elements confirm that the consensus among Western policy-makers was declining, whatever the bar against any open discussion that was opposed by the US administration, primarily by Treasury Secretary Jim Baker. Critically also, in May that year, Citibank increased massively its loss-reserves against developing countries debt and was soon followed by most other, large American banks. This was yet another signal of things to come, but so was the increasing arrears on interest payments, which many countries were now accumulating. Both creditors and debtor were desperately trying to exit the 1982 debt strategy, though without agreeing an alternate one.