UN General Assembly
1988

Among the basic causes of the external debt crisis are the serious errors made by banks and lenders when they set aside the very principles on which private credit activities operate and try ineffectually to supplant the development financing institutions and take over the functions assigned to them. Secondly, immediately following this, there occurred another very important change: the Governments and monetary authorities of some of the countries in which the creditor banks operated, to defend their currencies and fight inflation, took the political decision to raise interest rates to levels far above the average inflation rates, without taking into account the devastating effect that this step would have on the debtor countries. The result has been that some loans that were contracted at interest rates at a level in balance with inflation rates have to be serviced at an almost impossible level of interest, because there is no economic activity that can generate enough wealth to cover that imbalance, which is the result of a political decision taken by the Governments of developed countries.