ABSTRACT
In the early 1970s, the world experienced economic instability which was evidenced by a 'slowdown of economic growth in the industrial countries, high prices for commodities, food and fertilizers, rising inflation and interest rates, and general uncertainty in world monetary and trade relations'. 1 The immediate effects of these problems were severely felt in the Third World. Although some of these developing nations were able to cope with these problems through increasing the prices of their export commodities such as oil, the majority were unable to adjust to the situation. Among the consequences of these problems were the inability of the developing countries to repay their debts and the slowdown of capital transfers to them. This created severe balanceof-payments liquidity crises and caused a disturbing effect on creditordebtor relationships.
