International Debt INTRODUCTION This research examines the

Loans involved in a country's external debt are extended by other governments, by international organizations (primarily the International Monetary Fund and The World Bank), and by private sector lenders in other countries (primarily banks, but also by investors who buy bonds and other debt obligations). The International Monetary Fund (IMF), however, plays a special role in this loan activity, because it, for the most part, establishes the rules of the game for all parties, as well as extending loans on its own.1

1R. Grosse, and D. Kujawa, International Business (Homewood, Illinois: Richard D. Irwin, Inc., 1988), 174.1

The world's press provides a continuing stream of reports relative to the external debt of developing countries. Little has been reported, however, on (1) the emergence of the United States (US) as a debtor nation in 1985,2 (2) the grow

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The weak dollar is, in part, a function of the trade deficit. To keep the dollar from becoming even weaker in the face of continuing trade deficits, the Federal Reserve must either make massive interventions in the international currency markets, or it must further increase real interest rates. Although real interest rate increases would be welcome by foreign investors in corporate bonds and US Treasury instruments, they would also tend to dampen the country's economic performance. Thus, with respect to the value of the dollar and __________ 6Nussbaum, p. 161. 9interest rates, the US finds itself, so to speak, between a rock and a hard place. At the beginning of spring in 1990, the American dollar is strengthening against the yen and the mark, and the major result is a worsening of the country's international trade deficit. THE STATUS OF EXTERNAL DEBT Most of the world's developing countries have a net external debt in 1990. Some of these countries, however, have a much larger external debt than do others. Table 1, which may be found on the following page, presents the external debt for those developing countries whose net external debt exceeds US$20 billion. As the data presented in table one ind
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