The Future of Bank Lending to Developing Countries: The Debt Overhang and Market Access

All the indications are that bank lending to developing countries will continue to decline in the foreseeable future. The banks believe that they accumulated too high a stock of developing country debt in the 1970s and early 1980s and the process of portfolio adjustment therefore dictates attempts to reduce this debt overhang and not to add to it by making new loans. Projections of public debt service reflect this view. The World Bank, for example, envisages the servicing of developing country public debt held by private creditors falling from rather over $89bn in 1988 to rather under $33bn by 1994. The envisaged fall, in percentage terms, is even more marked for low-income Africa where public debt service is seen to decline from $1.4bn in 1988 to only $0.3bn by 1994.