International Borrowing Strategy and Sovereign Creditworthiness

The severe costs incurred by developing countries as a result of the debt crisis in the 1980s attest to the need for a systematic sovereign financial management strategy. This chapter offers a general set of financial axioms based on the cash-flow characteristics of foreign borrowing and is highlighted by examples drawn from the experience of the Baker-15 countries from 1972 to 1986. These financial guidelines support the efficient application of external financial resources to further structural transformation and other development goals.