er, thus, appeared to be heavenly sent. The banks, in their eagerness to loan money, made the most optimistic assumptions possible with respect to sovereign risk, with the result that (1) they loaned too much to risky borrowers, and (2) many countries borrowed too much (Stalling, 1987, pp. 94 102). OPEC, all the while, was relatively safe, because (1) the western banks were responsible for OPEC money invested with them, and (2) developing country obligations were to the western banks. In their eagerness to earn a fee, the western banks, as marriage broker, assumed responsibility for the success of the marriage of OPEC money and developing country borrowing.
The IMF is extensively involved in the developing country external debt crisis (Lipson, 1985, pp. 200 204). The organization created special facilities, which deal primarily with developing countries. These facilities are as follows:
1. The extended financing facility was created in 1974 to provide for loans larger than tranche quota loans and to provide for longer repayment periods than those associated with tranche loans. The extended facility loans were intended for nations where balance of payments problems were attributable to (a) structural weakness in the internal economy, or (b) weak external positions which precluded the implementation of an effective development program.
2. In the mid 1970s, two temporary oil financing facilities were established. These facilities provided temporary loans, without respect to quota, to assist member nations meet the increased costs of oil imports. The oil facilities were (and continue to be) funded through borrowed resources. A subsidy account was also established to assist those member nations most seriously affected by oil price increases in meeting the interest payments on oil facility loans.
3. A Trust Fund was established in 1976, to both make direct distributions and to make loans to low income developing nati...