Debt, Adjustment and Development-Looking to the 1990s

Debt, Adjustment and Development Looking to the 1990s Kari Levitt In the 1980s the IMF and the World Bank became the principal institutional mechanisms whereby developing countries unable to stabilise their external account were forced to 'adjust' in conformity with the priorities of the industrialised Countries. In the early 1980s, the overriding concern of the IMF was the threat to the stability of the international financial system arising from the exposure of hundreds of commercial banks, big and small, principally in Latin America, but also in eastern Europe and Africa. The new phenomenon of large-scale private bank lending to developing country governments, on floating interest rates, and short maturities, hailed as a creative initiative of the private sector in the 1970s, proved to be an all-round disaster, prolonging and deepening the adjustment of debtor countries to conditions of recession, falling commodity prices and rising interest rates. Adjustment replaced development, finance replaced sensible economics, exports replaced production for domestic use, and crisis management replaced economic and social planning. The human costs have been horrendous.