Debt Accumulation in the CIS-7 Countries: Bad Luck, Bad Policies, or Bad Advice?

By Ashoka Mody, Ratna Sahay, Thomas Helbling

May 1, 2004

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Ashoka Mody, Ratna Sahay, and Thomas Helbling. Debt Accumulation in the CIS-7 Countries: Bad Luck, Bad Policies, or Bad Advice?, (USA: International Monetary Fund, 2004) accessed December 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Following the breakup of the Soviet Union in 1992, several low-income countries in the Commonwealth of Independent States (CIS) accumulated substantial external debt in a short time span, about half of which is owed to multilateral financial institutions. Three factors contributed to the current debt burden. First, the initial years of transition brought large systemic economic disruptions, loss of transfers from the center and collapse of trade relations among Council for Mutual Economic Assistance (CMEA) countries, and negative terms of trade shocks. Second, fiscal and other reforms, and consequently, growth revival, took longer than expected. Third, overoptimism by multilaterals contributed to the high debt levels. If external financial assistance, which was needed because of high social costs of the transition, had come in the form of grants in the first two or three years of the transition, the debt burden would have been lower and sustainable.

Subject: Current account, Current account balance, Current account deficits, Current account imbalances, External debt

Keywords: Current account deficit, Debt, Deficit, WP

Publication Details

Pages:

42
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2004/093
Stock No:

WPIEA0932004
ISBN:

9781451851687
ISSN:

1018-5941

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