Mechanisms for reduction of the developing countries external debt

From the viewpoint of developing countries the so-called conventional debtstrategy is clearly unsatisfactory, mainly because it underestimates the dimension of the crisisand the domestic costs of the adjustment imposed on debtor countries. New privateloans, which are anyway more and more difficult to obtain, wouldn’t be a solution, in thesense that they would increase a debt that is already extremely high. Some mechanisms toreduce the stock of external debt have been introduced in recent rescheduling agreementswith creditor banks, such as debt-equity swaps, buybacks, and the exchange of part of thedebt for long-term bonds. However, for many countries, these market instruments will notprovide a sufficiently large reduction of the burden of financial foreign transfers. Therefore, it is necessary to arrive at an encompassing and lasting solution to the external debt problem,through the design of an adequate institutional and legal environment that could providemore support and additional guarantees to the implementation of debt reduction schemes. JEL Classification: F34; F63.