ABSTRACT
This chapter looks at the origin and causes of the debt crisis; the strategy that has been developed for handling it and what has been accomplished so far; the renewed difficulties that have appeared and the process of strengthening the strategy that is now under way. The debt problem began to build up in the 1970s when a number of developing countries progressively incurred growing amounts of external debt. The debt accumulation was encouraged by the persistence of negative real interest rates resulting from the highly inflationary conditions then prevailing. In late 1982 the International Monetary Fund moved to support the adjustment efforts of the most indebted countries. The strategy was intended therefore to stimulate growth through trade expansion in indebted countries and to provide them with new financing to push forward their investment plans. It would take time to work; several years of appropriate policies in both developed and indebted countries would be required.
