Trends in Recent Debt Management and the Nature of Economic Crises

The East Asian crisis of 1997-99 was essentially the external debt problems between financial institutions in both host and recipient countries, while the crises in other emerging market economies—such as Russia (1998), Brazil (1999) and Argentina (2001)—were associated with the external debt problems between sovereign borrowers and private investors. Although both crises were triggered by a reversal of such capital inflows caused by the change in investors’ sentiment, the conflicts of interests among creditors were more complicated in the case of Russia, Brazil, and Argentina than those in East Asia, since the presence of a large number of individual investors made it extremely difficult to practice restructuring negotiations over the foreign debt of indebted countries in the case of bond finance. Given that both private loan and sovereign bond problems may re-emerge in the future, it is crucial to examine external debt management practices applied to each case. This paper examines external debt management practices with respect to sovereign bonds as well as private sector external financing.