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Mr. Eduard H. Brau

project-select ion approach relying primarily on the debtor country authorities has been selectively attempted by a few major agencies, initially as a means to ration demand. The experience with this approach, which has been used in Jamaica, the Philippines, Turkey, and Yugoslavia, illustrates its possibilities and the potential drawbacks. In resuming cover for Turkey in early 1983, one major agency recognized that after several years of adjustment and investment restraint, there was a large pent-up demand for new projects of considerable commercial interest. The

Ms. Miranda Xafa

criteria in project selection by strengthening their own capacity for appraising projects and by expressing greater interest in cofinancing and parallel financing with the World Bank. However, they often find it difficult to resist pressure from exporters. Discipline in the selection of public sector projects must therefore be imposed by the debtor country authorities. In this connection, ECAs favor an expanded role for the World Bank in reviewing the public investment programs of selected countries undertaking adjustment. In the context of Fund-supported programs

Ms. Chanpen Puckahtikom and Mr. Eduard H. Brau

Abstract

In the current environment of payments difficulties, a principal role of the Fund remains the encouragement and support of timely adjustment policies of member countries.

International Monetary Fund. Independent Evaluation Office

others, 2012 ). The IMF was an important partner in the Vienna Initiative, providing financial support for country programs and policy advice. Authorities and other stakeholders credited the IMF with having played a key role in the efforts to convince banks to maintain exposures in emerging Europe, thereby avoiding a large capital flight. They appreciated the IMF’s use of analytical approaches to bridge differences, particularly in the early years of the crisis. While both creditor and debtor country authorities felt that at times the IMF had pressured them too much

Ms. Chanpen Puckahtikom and Mr. Eduard H. Brau

-by-case basis when moving toward resuming medium-term cover for rescheduling countries. Some of the major agencies have taken special measures to overcome the difficulties of project selection. For instance, in the case of Turkey ( Appendix I ), one major agency has tried preselecting projects for cover by limiting the transaction size and by specifying limits for selected projects to be covered. Another major agency has been able to transfer project selection to the debtor country authorities. However, some agencies stressed the impracticality of such attempts. The limits

Mr. Przemek Gajdeczka and Mr. Mark R. Stone

and tax decisions. Regulatory policies, which vary across countries, determine the extent of bank capital losses stemming from the creation of loan-loss provisions, loan write-offs or participation in loan exchanges, and outright loan sales. Tax decisions, which grant tax deductibility of loan-loss provisions, may discourage asset sales and participation in loan exchanges because banks can obtain tax benefits without disposing of the assets. Debtor country authorities . The national authorities participate directly or indirectly in the majority of debt conversions

International Monetary Fund

.5 percent. … 17. United Arab Emirates Mauritania 8/94 UAED 36 million A, P+I Rescheduled over 7 years, at zero interest. Graduated repay menu consolidation period covered 1995–96. 18. Uzbekistan Georgia 5/96 $1 million D, A Repayments over 10 years, including 5 years’ grace, at 4 percent interest. … Sources: Debtor countriesauthorities. 1 D = stock of debt; A = arrears; P = principal; and I = interest. Nicaragua and Russia finalized an agreement in October 1996 to restructure all commercial

Mr. Eduard H. Brau, R. C. Williams, Mr. Peter M Keller, and Mr. M. Nowak

guaranteed by the debtor government, also included in the restructuring arrangements. In some such cases where debtor country authorities proposed the inclusion of this type of private sector debt in the debt restructuring, banks requested that a public guarantee be extended. In some instances, private borrowers discharged their obligations by effecting debt service payments in local currency to the central bank of the debtor country, which then became the debtor vis-à-vis foreign banks. However, in most instances official entities did not extend guarantees to cover purely

International Monetary Fund. Research Dept.

discrepancy between debt-servicing obligations and debt-servicing capacity is particularly wide, it is possible that debt reduction operations will increase the incentives for debtor country authorities to introduce the necessary reforms. 37 At the same time, conditionality will remain necessary to ensure that adjustment programs stay on track; it will also be important to avoid a direct substitution of domestic for foreign debt. The political and social difficulties surrounding the sustained implementation of appropriate measures will certainly be eased if the sacrifices

W. M. Corden and Mr. Michael P. Dooley

. The incentives that lead investors to participate in swaps vary from case to case. In some instances, investors have been able to purchase existing debt in the secondary market at a lower price than the price at which the government is willing to redeem it. If an investor purchases a foreign-currency-denominated debt instrument at a 50 percent discount and sells it to the debtor country authorities for 100 percent of the equivalent domestic currency price, the government can be thought of as offering a favorable exchange rate for this transaction. Thus, as compared