Money Matters: An IMF Exhibit -- The Importance of Global Cooperation

Debt and Transition (1981-1989)

Part 4 of 7

Conflict &
(1871 - 1944)

Destruction &
(1945 - 1958)
The System
In Crisis

(1959 - 1971)
the System
(1972 - 1981)
Debt &
(1981 - 1989)
Globalization and Integration
(1989 - 1999)

Attempted Rescue

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The Baker Plan, proposed by U.S. Treasury Secretary James Baker in 1985, envisioned further concessions by all three parties involved: commercial banks and multilateral financial institutions would increase lending, while indebted countries would make greater efforts at fiscal, financial, and monetary reform.

Initial enthusiasm for the Plan quickly faded. The Baker Plan had only limited success because it merely delayed payment of the debt, rather than reducing it.


The Baker Plan


Reducing the Burden

More radical action was deemed appropriate. In 1989, US Treasury Secretary Nicholas Brady proposed writing off some of the debt principal, rather than merely rescheduling it as had been done since 1982.

The Brady Plan was hailed as the beginning of the end of the debt crisis, which had plagued financial markets for nearly a decade. Still, many developing countries thought it did not go far enough toward reducing their burden.
Reducing the Burden



Countries Don't
Go Bankrupt
Time Bomb Explodes Solving the Problem Attempted Rescue
Regional Economic Integration The Power of Private Capital Thaw in the East

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