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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.

Mr. Christopher J. Jarvis, Mr. Balázs Horváth, and Mr. Michael G. Kuhn

Links Between Risk Assessment and Cover Policy Agencies observed that their most important decision resulting from the risk assessment process was whether to provide export credit cover to a country or not. Every agency was off cover altogether for some countries where the stance of policies, the track record, and the external environment appeared to offer little prospect that the country would be in a position to service new loans on commercial terms. However, almost every agency covered in this study was on cover for political reasons for some countries

International Monetary Fund

governments that are represented. The increasing attention being paid to these questions was also reflected in the discussions at the spring 1985 and subsequent meetings of the Interim and Development Committees. For example, the April 1985 Interim Committee communiqué stated: For those countries whose external debt has been rescheduled, whose prospects of economic progress are good, and which are undertaking satisfactory adjustment policies, the industrial countries should consider resuming export credit cover, subject to standard national policies. By the time of

International Monetary Fund

in the mid-1980s when the sharp fall in export revenues led to a similar compression of imports in oil exporting countries. The downward trend in new commitments appears to have ended in 1988. A number of the agencies covered by this study reported significant increases in offers (to provide export credit cover if an exporter wins a contract) and commitments, while others reported an increase in applications that had not yet been translated into offers. Most agencies cautioned that a small number of large transactions accounted for these increases, and that they

Mr. Eduard H. Brau

International Monetary Fund stated: “For those countries whose external debt has been rescheduled, whose prospects of economic progress are good, and which are undertaking satisfactory adjustment policies, the industrial countries should consider resuming export credit cover, subject to standard national policies.” At the same time, the Joint Ministerial Committee of the Boards of Governors of the Bank and the Fund on the Transfer of Real Resources to Developing Countries (Development Committee) noted in its communiqué the importance of officially guaranteed export

International Monetary Fund

governments that are represented. The increasing attention being paid to these questions was also reflected in the discussions at the spring 1985 and subsequent meetings of the Interim and Development Committees. For example, the April 1985 Interim Committee communiqué stated: For those countries whose external debt has been rescheduled, whose prospects of economic progress are good, and which are undertaking satisfactory adjustment policies, the industrial countries should consider resuming export credit cover, subject to standard national policies. By the time of the

Mr. Eduard H. Brau

delegating authority for banks and exporters and of transaction limits. Earlier Resumption of Cover in the Debt Rescheduling Phase Concerning the rescheduling and recovery phases, a major recent development in policies and practices has been the tendency, in the case of countries that are successfully implementing adjustment policies, for export credit authorities to modify the traditional rules governing the resumption of export credit cover. At least one half of the agencies reported that they were following practices that would permit an earlier resumption of

Mr. Eduard H. Brau

widespread payments arrears and a record number of debt reschedulings in the Paris Club. These adaptations have aligned export credit cover policy more promptly and more closely with progress, or lack thereof, in adjustment made by indebted countries, providing financial support for the adjustment process. Besides helping support adjustment, this flexibility has contributed to a significant increase in export credit exposure at a time when nonguaranteed commercial bank lending has grown only moderately. In the context of a moderate decline in the value of non-oil imports

Mr. Christopher J. Jarvis, Mr. Balázs Horváth, and Mr. Michael G. Kuhn

Club, But they have also been slow in reacting to improvements in the policy environment of some middle-income rescheduling countries and have found it difficult to adapt their cover policies to take full advantage of profitable business opportunities with the emerging private sector in developing countries and the economies in transition. Mixed Credits In attempting to improve the quality of their risk portfolios, agencies have become particularly keen on providing export credit cover to countries they consider low-risk markets, and they compete vigorously in