This paper analyses the history and effectiveness of the two major mechanisms of resolution of balance of payments crisis. It argues that IMF lending has met its counter-cyclical objectives through history and has been improving in terms of providing adequate lending facilities as well as focusing conditionality on macro-relevant areas. In contrast, and despite the spread of collective action clauses, much remains to be done in the area of debt restructuring. In this regard, it proposes a multilateral mechanism that offers a sequence of voluntary negotiations, mediation and eventual arbitration with pre-established deadlines, similar to that used in the World Trade Organization’s dispute settlement process.
Ocampo, J.A. Resolution of Balance of Payments Crises: Emergency Financing and Debt Workouts. UNU-WIDER, Helsinki, Finland (2015) 39 pp. [WIDER Working Paper No. 2015/011]