Response to State Fiscal Crisis - Drawing on Experiences in International Finance

Masatsugu Asakawa
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Masatsugu Asakawa: Deputy Vice Minister of Finance for International Affairs, Ministry of Finance

Public Policy Review, 2011, vol. 7, issue 1, 109-152

Abstract: What primarily does the "failure of nation" mean? Although it ultimately means the denial or abandonment of public debts, practically, any failure to repay on a due date might eventually lead to an official debt restructuring arrangement such as a deferral, or reduction of principal and interest payments. In international finance, the State Debt Restructuring Mechanism (SDRM) was once discussed at the IMF in the early 2000s. This mechanism aimed at restructuring national debts through a legal framework. No clear conclusions, however, were reached. In this paper I first summarize the discussion on SDRM held at that time. Then I discuss the functions and roles of the Paris Club, an official body responsible for the restructuring of public debt. I then overview the functions of the IMF and its development, the central player in addressing balance of payment crisis in individual countries, while highlighting the economic crisis in Mexico (Tequila Crisis) in 1995, the Asian currency crisis in 1997, and the global financial crisis subsequent to the Lehman Shock in 2008. Next, I discuss the financial cooperation in East Asia, an effort that has been enhanced since the early 2000s, finally followed by an analysis of the economic implications of the currency union by referring to the Greek Crisis in 2009.

Date: 2011
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