IMF Press Conference of Mr. Boorman on the IMF's Review of IMF-Supported Programs in Indonesia, Korea, and Thailand

January 19, 1999

January 19, 1999
10:00 a.m.
IMF Headquarters
Washington, D.C.

  Jack Boorman
MR. ANJARIA: Good morning, ladies and gentlemen. I'd like to welcome you to the press briefing by Mr. Jack Boorman, who is Director of the Policy Development and Review Department of the International Monetary Fund.

This briefing is about the first assessment that the IMF staff has carried out on recent IMF-supported programs in Indonesia, Korea, and Thailand, a document that has been made available to you. I would like to remind you that the document and the contents of this briefing are under embargo until 1:00 p.m. Eastern Standard Time today.

I'd like to ask Mr. Boorman if he would like to make some introductory comments, and then we'll go to your questions.

MR. BOORMAN: Thank you, Shail.

I will beg the indulgence of those of you who are here to make a few remarks about this study. You will see that this has been printed in two parts. The material at the front is the staff report. That was done as an internal review of the experience we have had in supporting through policy advice and through financing the crisis countries of Indonesia, Thailand, and Korea. This is the first systematic internal review that we have done to try to step back and take stock of the experience that we have had with these countries and the way in which those programs have unfolded.

The second part of the document, in blue, is a summing-up of the Board discussion of the staff's paper. I'll come back to that in a second.

Let me say that the paper says, in essence, that the policies the Fund recommended and which to varying degrees the three countries-- Indonesia, Korea, and Thailand--followed were broadly appropriate to the circumstances given what was known as these programs unfolded. Most importantly, and going to some of the issues that have been subject to a good deal of discussion outside the Fund, the higher interest rates which you have seen in these countries in the context of these programs were, we believe, needed at the outset to help prevent currencies from going into a downward spiral, and we believe that that has worked.

Secondly, tighter budgets appeared to be justified at the outset of the programs based on the Fund's--and I would say also other people's and other institutions'--initial assessment of the prospects for these countries. But it also says that a loosening in fiscal policy was seen as needed as the depth of the crisis unfolded, but that such loosening might possibly have been implemented sooner. I'll come back to that point as well in discussing the summing-up.

The third point, that the emphasis on structural policies--financial sector reform, corporate restructuring, many of the other actions taken by the authorities in the context of these programs--was appropriate.

Let me just mention that this paper and this kind of exercise is typical of what we do periodically to, as I say, stand back and take stock. It's in the nature of the review that we did of the ESAF a year or so ago which was published. You will recall at that time there was also an external evaluation done of our ESAF-supported programs which was similarly published.

Just by way of information, there is at the present time also an external review of our surveillance activities with countries underway, which I expect will be completed during the spring of this year and published soon thereafter.

Let me say in passing that this document, this study, covers the experience of these countries up until October 1998. It looks particularly at the design of these programs, their macroeconomic policies, their structural policies, the kind of advice that was provided, the way in which events developed, and an assessment of the appropriateness of those policies.

There are many other aspects of these events--the frame, if you want, of the international capital markets, the way in which capital flows affected these countries, created vulnerabilities and so forth--which are touched upon in here but not examined in great detail. There are other reports: the International Capital Markets Report, which was published in September, I believe, and there was an update of that report published in December, and, of course, the World Economic Outlook papers themselves, which in the last several editions have also looked at the broader aspects of the experience in these countries.

But back to the crisis. The crisis that was faced in Asia by these countries differed in many important respects from the kinds of crises that we typically see when we're asked for support and advice by member countries. In particular, these were not countries characterized by long periods of profligate government spending financed by the creation of money and high inflation levels resulting therefrom. In fact, fiscal policy in most of these countries had been conducted pretty well over the period before the crisis.

The crisis did occur, however, in the context of volatile financial markets that, as we've all seen, can move with devastating speed, and a speed which leaves the policymakers in these countries with really no room for hesitation. It's a new world for policymakers, and a world that will be punishing when mistakes are made.

The challenge for the countries that were involved in this crisis--and, indeed, for the Fund and for the international community in trying to support them--was basically to design policies that would halt the crisis and then promote a recovery and a return to sustainable growth.

In the first instance, stemming a crisis of confidence that's manifested in the collapse in the value of the currency and that brings with it the risk of hyperinflation, as was a risk in all of these cases, leaves a government little choice but to take tough monetary policy actions. All three of the countries that are examined in this study increased interest rates somewhat to make holding the domestic currency more attractive. But I think what the report shows is they did not act soon enough or boldly enough to head off a full-blown crisis.

All of these three countries, though, are now seeing the benefit of tightened monetary policy as a restoration of currency stability allows interest rates to decline. In Korea and in Thailand, in fact, interest rates are now down below their pre-crisis levels.

I put this very briefly, but there's an extensive chapter in the report on monetary policy because it has received so much attention and, indeed, criticism and questioning outside the Fund. The report concludes on this point, though, that, in essence, if we were making these decisions again on monetary policy, on interest rate policy, we would, if anything, call for prompter and more aggressive action along similar lines.

Fiscal policy is another critical element of the programs and another element which, of course, has received a good deal of attention outside the Fund. Here a degree of budget tightening was envisaged at the outset of each of the three programs, in part to pay for what we and the authorities saw coming in the way of extensive costs of rehabilitating the financial sector. This has been common in a number of countries where we have operated, and it was clear that the cost to the budget in each of these three countries of rehabilitating the banking system was going to be high and the government had to begin to posture itself to be able to cover those costs.

There are various ways in which fiscal posture in a country can be measured, and there's also a discussion in that chapter about these different measures.

The tightening that was advised to the countries was planned at a time when we in the Fund, like other observers, thought these countries would get away with a comparatively mild slowdown in growth. That tightening was then put into reverse once it became apparent that the recessions these countries faced were going to be deeper than expected and that expansive budget policies would be needed to help cushion the economies in their recessions.

The message here, I think, is twofold. One, there was good reason from the standpoint of halting the slide in confidence for guarding against fiscal slippage in the beginning phases of these programs, and in this connection, the extent of actual tightening of the budgets should not be overstated. These measurement issues that are dealt with in that chapter are important.

Secondly, the budget targets established in the programs were predicated on a view of macroeconomic prospects that turned out in hindsight to be mistaken. They were too optimistic. There is some case, as a result of that, that the easing of fiscal policy could have been a bit prompter than perhaps it was as the circumstances changed.

The third issue, on structural policies, as you see, the paper gives a lot of attention to structural policies, making the point that a major focus was needed in this area to address the root causes of the problem, notably vulnerabilities in the financial sector, in the corporate sector, and in a sense in general the way in which these economies were organized as far as their incentives to private sector activity and regulation and supervision of private sector activity.

It's the nature, unfortunately, of structural policies that they take time--time to implement and time to yield results. That I think created a certain deal of angst, confusion, in the beginning of these programs--the extent to which the markets believed that the authorities in these difficult areas were really going to persist with the kind of actions that needed to be taken.

Certainly, there can be questions in hindsight about some of the specific measures taken, as well as their pace and sequencing. It would be odd, indeed, if there were not. But in reviewing the programs, we remain convinced that comprehensive financial, corporate, and other structural reforms were needed and had to be at the center of these programs in all three of these countries.

Finally, there's a discussion of social safety nets that were strengthened and in some cases, in fact, created anew, such as the unemployment compensation scheme in Korea, needed to alleviate the human cost of the crisis. The paper highlights, amongst other things, the room made in budgets for these policies and points to the collaboration between the IMF, the World Bank, and the Asian Development Bank in this area.

Let me say just a few words, if I may, about the other document that you have, the blue pages, which is the summing-up from the Board discussion. For those of you who are not familiar with the Fund, at the end of country surveillance discussions, and at the end of policy discussions in the Board, the Chairman--in this case the Managing Director--sums up the views of the 24 Executive Directors who represent the 182 member countries in the Fund to get a sense of the conclusions that come out of that discussion. The summing-up in this case is fairly long because there was, in fact, a fairly long and in-depth discussion by the Board going on all day on the staff paper, bringing the views of Directors to the issue.

On the main themes, you'll see from the summing-up itself, the Board agreed with the staff's view of the exceptional nature of the crisis and the need for comprehensive programs embracing both macroeconomic and structural policies, as well as external financing. They agreed in general that in the midst of the crisis, the formulation of programs on the basis of floating exchange rates was really the only realistic and sensible approach. And they noted the main goal of monetary policies in these countries was to avert a depreciation-inflation spiral and that in these programs, after a hesitant start, that approach had been largely successful.

They also noted that initially there had been a need for fiscal adjustment to prevent an expansion of fiscal deficits. Executive Directors in this discussion saw a central lesson of the importance of ongoing efforts to involve the private sector in forestalling and resolving financial crises, and we can talk to that if you would like because it's a critical conclusion of this experience.

Nevertheless--and there's nothing unusual here--there was a range of views in the Board on some aspects of the programs. They're covered in the summing-up, and here I would suggest in reading it you do need to take seriously these perhaps unduly repetitive references to a "few Directors" and "some Directors" and "several Directors" and "all Directors." You have to take them seriously because to get the center of gravity of the Board, you've got to find your way through that. What we attempt to do in summing-up is to reflect the diversity of views. But there is clearly a center of gravity in the conclusions of the Board on these issues, and they need to be taken carefully from that paper.

So the purpose of this exercise was basically to draw on the experience that we've had to date and see what conclusions could come out of a hard look at that experience. The jury is clearly out on a number of questions, and there are lessons that emerge when you have the benefit of hindsight and the greater clarity that hindsight brings.

Clearly--and this is something the international community is working hard on--there are things that need to be done in advance to forestall a crisis. This crisis didn't have to occur. If policies had been implemented differently over the course of the last number of years, it is possible that this crisis could have been avoided. It is a function of policy.

So things need to be done to better the situation and better policy performance in all countries--issues like transparency standards involving the private sector and so forth--and the community is working on that. All are encompassed in this broad rubric of reform of the international architecture.

These lessons will continue to be explored. They're being explored here in the Fund. They're being explored in a number of other fora, and I expect that at the time of the Interim Committee meetings towards the end of April there will be reports, I hope, of a good deal of progress in a number of those areas.

QUESTION: What's the key to actually making sure that the era of overly optimistic ratings of economies doesn't happen again? Is it better data from the countries themselves or is it a different approach perhaps by the IMF in terms of the way that it looks at those numbers?

MR. BOORMAN: It's tricky business. One necessity is to go back and study crises in depth and the extent to which we did or did not--and the authorities did or did not--see the prospects of what was coming early on so that policies are framed as directly as possible to those expectations.

The problem in this business is you're faced with a dilemma. If the policies work and if confidence is restored, you ought to be able to get on with recovery and get on with growth. So you've got to ask yourself: What are we, what are the authorities not doing that could be done further to make sure that the confidence is restored very quickly? And that goes to a lot of the questions on architecture.

How can you make sure that, for example, the private sector can be brought into the financial side of these operations in a better way than they have been to date. Because if people expected that the private sector was not going to rush for the exits in the same way they did here, they would have more confidence themselves in staying, and that would help the prospects for recovery.

So I think there's a number of things that can be worked on. It goes to issues such as transparency as well, which would in our view hopefully limit the event of crises.

One of the things that clearly happened in these countries was that by the time markets found out certain things, they were taken by surprise. They were taken by surprise certainly at the beginning of the Korea program by the extent to which Korea's reserves had been depleted. They were taken by surprise at the beginning of the Thai program by the extent to which the Thai authorities had built up obligations in the forward markets such that their net reserves were basically zero.

One of the conclusions the international community has drawn from this is that if markets know of developments like this on a more timely basis, they'll react in a steadier, more progressive fashion rather than the way they react when they're taken by surprise. And in reacting in a steadier fashion, they'll also be disciplining, if I can use that word, policies in the countries so that policies will have to be adjusted more quickly.

We have a major effort under way now to try to better define international reserves, for example, so that people know precisely the usability of the reserve figures that are published by countries, and also we are trying to encourage countries--this is still a matter under discussion--to put out reserve data much more frequently and with much less of a lag.

QUESTION: Janet Guttsman from Reuters. You say the crisis could have been avoided. What specific steps should have been taken? And then just to go back to my colleague's question, exactly how do you plan to improve your growth forecasts?

MR. BOORMAN: On the first, it's not simply a matter of specific steps that need to be taken. It is very much a way in which business is conducted and policy is formulated to prevent crisis, and this goes to a number of the points that I was just making, which are being discussed under the topic of architecture.

Let me take two different tacks on that, though. One is, given the situation of these countries, what could have been done. I think as is well known, as we have said, and as the Thai authorities have indicated, we were in the course of 1996 and early 1997 pretty directly and forcefully warning the Thai authorities that pressures were developing and that they were under threat. There were questions about the sustainability of the exchange rate. You know what had happened to the competitiveness of the Thai baht partly as a result of the appreciation of the U.S. dollar to which the baht was tied. You know perhaps what happened in terms of the building of excess capacity in certain sectors which began to show up when electronic exports from Thailand began to weaken, and so forth.

There were a number of problems there that we were warning about. The Thai authorities did not act, and, in fact, the way in which they responded to the initial pressures was to intervene in the foreign exchange market, in the forward market in particular, to try to protect the then-prevailing rate of the baht. But in doing so, they basically exhausted their reserves and very narrowly constricted their room for maneuver on the additional policies that were then available to deal with the situation. So one of the specific steps clearly has to be early action when a threat develops.

The other more general side of the story is, as I put it, how to conduct business in an economy with open and with liberal markets. And there were a number of things done in each of these countries that warranted correction years ago. Each of these countries opened themselves to great vulnerability by accepting short-term flows of capital in a way that ultimately proved destabilizing.

If you look at the Korean situation, we in the Fund, for example, were criticized at the beginning of the Korea program for suggesting that there should be further liberalization of the Korean capital markets. And the instinctive reaction of a number of people was to say, wait a minute, it was liberalized, open capital markets that got Korea into trouble, and you're advising them to do even more of it.

The fact of the matter is in Korea--and you'll see this in Thailand, too--the way in which they opened the capital markets was the issue. The Koreans permitted the Korean banks basically to borrow and fund themselves externally with very short-term credits and then on-lend those credits to the Korean corporations, long term, medium term. So they had a maturity mismatch in their portfolios.

Similarly, at the same time, foreign investors couldn't get into Korea with long-term money. The bond markets weren't developed, and there were lots of restrictions on the purchase of equity in Korea. So you ended up where a structure was created that made the country tremendously vulnerable to open markets because of the bias towards short-term exposure.

What we were saying was you've made yourself too vulnerable, don't conduct business that way, open your markets at the long end, let foreign direct investment come in, let corporations fund themselves through bond issues, through equity issues, and limit the attraction of short-term funding and the necessity of short-term funding. So, again, a way of doing business over time that can avoid the vulnerabilities that led to these crises.

On the second part of your question, how to improve growth forecasts, that's tricky business. Part of the problem goes to this question of what do you assume about the implementation of policies. Do you assume they are going to be implemented and they are going to have their effects? If so, you're going to have one scenario. Or do you assume that they won't be implemented? Or even in being implemented, they won't have the confidence-inducing effects that you want to see?

I think there's a couple of things that can be done. One is clearly to build in contingencies perhaps more explicitly than is frequently done. Suppose things go wrong, what are you going to do in that case?

In a lot of programs we do that. We do it on fairly obvious things. For example, when we had a program with Mexico, we very explicitly built in scenarios for what if the price of oil is not what you expect it to be. Suppose it's lower, what are you going to do? How are you going to react as regards fiscal policy, as regards monetary policy, and so forth? So building in those kind of contingencies is important.

The other element of that is probably to look in as detailed a fashion and as careful a fashion as you can about what happens in the neighborhood also if things go wrong. Now, our World Economic Outlook exercise attempts to do this to a certain extent. But if you have a single country like Thailand and there is the prospect that an unwinding of the Thai baht, for example, can change the competitive position of Malaysia and Indonesia and similarly situated countries, how can you take that on and how can you build it into your growth forecast and prospects for the country in a more explicit way than perhaps has been done to date?

QUESTION: Jeremy Pelofsky from Bloomberg. As we're looking back towards Asia and saying, as you say, that the interest rate policy was the right approach, and you look at what's happening in Brazil today with it raising its interest rates and yet the pressure still mounting on its currency--is there some difference in those policies, reversing courses a little bit by letting the currency float in Brazil and now you have the interest rate still going up again today?

And if I may, a second question. You talked about the markets knowing about the developments and how these programs are working and all of the information. Is there some mea culpa in a sense of the Fund doing its job of informing the market that needs to be done?

MR. BOORMAN: Thanks. Let me begin by first off saying you know, of course, what's going on in Brazil. You know that the regime from a narrow band and a crawling, slowly depreciating currency has been changed and in two steps the authorities have now moved to a float. The fact of the matter is when a country floats its currency, it's going to be tested by the markets. It's going to be tested to see whether or not it intends to defend the currency with other policies. And I think that's basically what's going on in Brazil at the present time.

The Finance Minister, Mr. Malan, was perfectly clear, and I think absolutely right, in the press conference that he had yesterday in saying that now that Brazil has floated the currency, the demands on fiscal and monetary policy are even more strict than they were before. Fiscal and monetary policies become even more important in the world of a floating rate. And Brazil is working--and he described what's being done--on both of those fronts to strengthen the situation. There's a lot of action scheduled for congressional decision in the course of this week on some of the key fiscal measures that needed to be put in place. And the monetary policymaking body of the central bank met yesterday. They widened the band of interest rates in which they can operate, and as a clear manifestation of their intention to use that flexibility, they increased interest rates last evening. So the market is testing.

Do we think that's the right reaction? We do indeed. We think that a strengthening of fiscal policy along the lines of the original program and perhaps some additional action to take account of the impact of the devaluation itself, and a tightening of monetary policy to convince markets that the authorities, notwithstanding the fact they have floated, are not about ready to treat the currency with benign neglect will indeed protect the currency.

Why is that necessary? You all know the history of Brazil. A strongly depreciating currency in Brazil could trigger inflation; inflation in Brazil is in the forefront of people's minds. It's all too recent an experience. So the authorities have got to act convincingly to show markets, to show people that they don't intend to let inflation get out of control, that they intend to control the pass-through from the depreciation of the currency to inflation to avoid any kind of damaging spiral.

On the second part of your question--the job for the Fund to inform markets--there's a lot going on in the Fund under the heading of transparency. Increased publication of documents, this kind of thing, is an example of the changes that have taken place in the last number of years. Doing these kinds of studies--we have always done them, but typically they weren't published. This one now is being released for public discussion immediately after the Board discussion of the document. That's a way of informing markets, informing the public more generally, of our own assessment and our own views of the kinds of experience that we've had in the context of this crisis.

Similarly, in the context of each of the individual programs involved here, but also with other countries with whom we have programs, for most of them you will find the letter of intent of the authorities agreed with the Fund on the Website of the IMF. This material is being published. Similarly, more analytical material is being published on our view of the situation of countries. In the context of Article IV consultation reports, the Public Information Notice, which is essentially the summing-up of the Board discussion, plus some analytic background material, is now put out as well.

That was not the case in 1996 when we began to worry more and more about Thailand. It's an interesting mental experiment to ask what would have happened if we had had that mechanism at that time and had been putting out warnings to the market about the weaknesses that we saw developing.

You know, where we're coming from on this is basically in a world of open markets that has developed, programs of this nature for emerging market economies that have access to capital markets will only work if the capital markets become convinced and if private investors become convinced that the situation is going to be corrected.

Now, how do you convince markets? Well, you can't do it by simply holding up the flag and saying the country has an IMF program, therefore trust us. That won't work. It requires lots of information to markets so that the markets can assess the programs themselves, the markets can assess the policies themselves, the markets can look at what's going on as a way of assessing the commitment of the authorities to do the kinds of things that are necessary. So letters of intent, more analytical material on our view of the situation of countries, and I would say something which perhaps was not done to the extent it needs to be done in these kinds of cases, a very public, positive effort by the policymakers of the countries involved at the beginning of these episodes to go out and explain what the program is, to explain the actions that they're taking, to tell the public and the markets why they're taking these actions, to tell them what they think the initial results are going to be, and to admit that the initial results of this kind of adjustment are not always pleasant. You have to go through some pain to correct some of the problems that have developed, but also to keep the public focused on what the objective of these programs is.

There needs to be more of that. We've had experience with some countries being supported by the Fund financially and with policy advice where a few of the key policymakers really made this a very important part of their job to go out and explain what it's all about.

I remember the early days of the Korea program, lots of talk in the Korean press about IMF program and so forth. The general public--and I would say well beyond the general public--doesn't have a clue what an IMF program is. You've got to tell them. We have to tell them. The authorities have to tell them. And it has to be explained. They have to be brought through it. That's the perception from which we are coming in terms of these issues of transparency and what we think the job of the Fund is in terms of informing the markets.

QUESTION: Mr. Boorman, what are the principal mistakes that the Fund made during this 18-month period in Asia?

MR. BOORMAN: If I answer your question, this will no doubt become the headlines of the press conference.

Let me give you a few examples of the kinds of lessons that we're learning out of this. I've already alluded to a couple of them, I think. If we were doing this over again, with the wisdom of hindsight, I think we would have been more insistent on earlier and more aggressive tightening of monetary policy and raising of interest rates. I think what we saw in each of these countries was a performance on monetary policy and on the most visible aspect of it, interest rates, that left the markets confused after the exchange rates were floated as to the extent to which the countries were going to defend rates. And it left them confused about what the conduct of monetary policy was going to be.

I think the proof of that pudding, so to speak, is that by the end of December and through January, when it became clear in particular in Thailand and in Korea that the authorities were willing to use interest rates to react against further weakening of the currencies, it began to work. And I think to the credit of the authorities in those two countries, they held interest rates at high levels until the rates stabilized and then until they began to appreciate. And it was only after they saw a confident reversal of what was clearly excessive depreciation of the currencies that they then let interest rates ease down, and the result is what you see. Interest rates are now below pre-crisis levels in those two countries. So I think there's a lesson there.

The question that we just addressed in terms of growth forecasts and so forth, be careful not to be too optimistic on the initial reaction of markets and of the public to the beginning policies of the authorities. And here I think there is a lesson. In many of these cases, we seem to go through--and the authorities seem to go through--what amounts to what I might call a two-try approach. You remember back in the Mexican crisis in '94, beginning of '95, the measures that the Mexican authorities committed themselves to at the end of December in the end had to be strengthened before markets became convinced in February and March that the authorities were really coming to grips with the problems they faced.

In Thailand, we had a relatively weak, fragile coalition government with whom the initial program was negotiated in July 1997. It was only when the new government came in at the beginning of November and Mr. Tarrin, the Finance Minister, went public aggressively talking about the design of the program, the things that needed to be done and so forth, that people began to become convinced that the authorities were going to be able to deal with the situation.

You had the same thing in Korea. The program was approved in the very first days of December. You then had problems in the market with the perception of the extent to which the three presidential candidates were committed to the kinds of policies that had been agreed with the Fund and with the international community. And you had turmoil in the markets in light of their lack of confidence about the commitment of the authorities to those actions.

It was only after the elections on December 18 when Kim Dae Jung, the President-elect, came out very forcefully and said these are the right policies, we're going to stick with them, and we're going to implement them fully--that, combined with the restructuring of the commercial bank debt, turned the course of events. So there are issues there.

Another issue, related to the fiscal stance, is how quickly and how flexibly one reacts if you see the situation emerging in a way that is less positive than you might have hoped.

Yet another, a critical question, I think, goes to the issue of the involvement of the private sector. This is perhaps the thorniest of the issues that's being discussed in the context of all these discussions on architecture. There are two aspects to it. One is what I refer to as the ex ante or preventive aspect, and the other is what do you do in a crisis. As far as the ex ante part of it is concerned, the question is: How can you induce the private sector to behave in a manner that is less likely to create vulnerabilities of the kind that we've seen in these countries? That goes to supervision and regulation in the host country. It goes to the question about differential capital adequacy requirements in creditor countries. It goes to information about the operation of hedge funds and speculators. It goes to many, many of these questions.

It also raises possibilities which are already being experimented with. As you may know, both Argentina and Mexico have lines of credit with private banks which they can draw upon in the event of difficulties. These contracts do not have clauses that refer to material change in circumstances the way credit lines frequently do. There is not a limitation. If either of those countries, for example, in the context of the current uncertainties in Latin America are faced with a demand for additional resources, they can call on these credit lines. That's a way for the private sector to be assuredly involved in providing support to the country in a moment of crisis rather than to be seen as running for the exits and creating further pressure on the country.

So that's by way of prevention and ex ante measures. In the moment of crisis, though, there are also questions about how to involve the private sector. There are no simple mechanisms, and there is no institution in the world that has the authority needed to force the continuance of participation by the private sector.

We have had a lot of experience over the last couple of years. We have the Korea rollover and restructuring by the creditor banks in major capitals of the world. We have seen a restructuring of the bond-like instruments that Ukraine had with creditors. We have the unfortunate experience of Russia declaring with its creditors.

So there's a lot of experience evolving. But there are a lot of questions out there. In the 1980s, I wouldn't say it was easy but it was at least possible to get the major bank creditors of these countries in a room, talk to them, cajole them, encourage them to reschedule, to restructure their debts with these countries. There's a critical issue about how you do that in a world of securitized debt where a large portion of the debt of these countries is in the instrument of bonds. The bonds are held by thousands and thousands of people who can't even in many instances be identified, and they don't have the same legal characteristics as syndicated bank loans, giving you the ability to deal with a well-defined set of creditors.

Those are issues that we're looking at, that the community more generally is looking at, to try to bring a better situation there.

[Edited transcript]


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