A New Approach to Managing the Debt Crisis

The debt crisis, and the IMF-sponsored stabilization programs enacted in response to it, have resulted in an excessive degree of ansterity for several of the debtor countries. The current creditor strategy, it is argued, is not sustainable over the long term unless the debtor countries are allowed to grow. The author advocates a more generous treatment of debt servicing requirements, in the form of partial debt relief, as the most effective method of promoting LDC growth. One possible strategy for granting debt relief is discussed as well as the type of conditionality which should be imposed in retum for debt relief.