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

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  • Ashoka Mody
  • Ratna Sahay
  • Thomas Helbling

Abstract

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.

Suggested Citation

  • Ashoka Mody & Ratna Sahay & Thomas Helbling, 2004. "Debt Accumulation in the CIS-7 Countries; Bad Luck, Bad Policies, or Bad Advice?," IMF Working Papers 04/93, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:04/93
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    References listed on IDEAS

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    1. Carmen M. Reinhart & Kenneth S. Rogoff & Miguel A. Savastano, 2003. "Debt Intolerance," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 34(1), pages 1-74.
    2. Stanley Fischer & Ratna Sahay, 2000. "The Transition Economies After Ten Years," IMF Working Papers 00/30, International Monetary Fund.
    3. Nauro F. Campos & Abrizio Coricelli, 2002. "Growth in Transition: What We Know, What We Don't, and What We Should," Journal of Economic Literature, American Economic Association, vol. 40(3), pages 793-836, September.
    4. László Halpern & Charles Wyplosz, 1997. "Equilibrium Exchange Rates in Transition Economies," IMF Staff Papers, Palgrave Macmillan, vol. 44(4), pages 430-461, December.
    5. R. Gaston Gelos & Ratna Sahay, 2001. "Financial market spillovers in transition economies," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 9(1), pages 53-86, March.
    6. Stanley Fischer & Ratna Sahay, 2000. "The Transition Economies After Ten Years," NBER Working Papers 7664, National Bureau of Economic Research, Inc.
    7. Carlos A. Végh Gramont & Ratna Sahay & Guillermo Calvo, 1995. "Capital Flows in Central and Eastern Europe; Evidence and Policy Options," IMF Working Papers 95/57, International Monetary Fund.
    8. L. Wade, 1988. "Review," Public Choice, Springer, vol. 58(1), pages 99-100, July.
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    Citations

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    Cited by:

    1. Junko Koeda, 2006. "A Debt Overhang Model for Low-Income Countries; Implications for Debt Relief," IMF Working Papers 06/224, International Monetary Fund.
    2. Alex Segura-Ubiergo & Alejandro Simone & Sanjeev Gupta & Qiang Cui, 2010. "New Evidence on Fiscal Adjustment and Growth in Transition Economies," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 52(1), pages 18-37, March.
    3. Richard Pomfret, 2006. "Coordinating Aid for Regional Cooperation Projects: The Experience of Central Asia," The Institute for International Integration Studies Discussion Paper Series iiisdp163, IIIS.
    4. Alexander Salhi & Andreas Kern & Martin Rößler, 2010. "Growth Patterns in the CIS-8: A Political Economy Approach," Transition Studies Review, Springer;Central Eastern European University Network (CEEUN), vol. 17(4), pages 686-708, December.

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