ABSTRACT
The so-called ‘international debt crisis’ first came to public attention on 13 August 1982 when Mexico unilaterally announced that it could no longer service its $80 billion external debt. Although individual countries like Ghana, Turkey and Indonesia had suffered debt servicing problems in the 1970s, these had essentially been isolated incidents of internal policy mismanagement. In contrast, during the second half of 1982, it became apparent that dozens of other developing countries shared Mexico’s problems. Squeezed between world recession and high real interest rates, and suffering capital flight on an unprecedented scale, the developing world found itself incapable of servicing the external debt it had accumulated during the 1970s. As its major creditor, the international banking system faced the prospect of collapse in the event of a generalized default by the developing countries. In this sense, the international debt crisis was initially a banking crisis and the solutions advanced for its management were primarily directed at maintaining the solvency of the international banks (Lever and Huhne 1987).
