all or some of their major creditors, as in the cases of korea and brazil. those facing unsustainable debt positions may seek to negotiate market - based write - downs of their debt, as in the cases of ukraine, pakistan and ecuador. and in yet another set of cases, a country may find it necessary to impose a temporary timeout on payments to all creditors, to give themselves some breathing space to address macroeconomic or co - ordination problems. the decision on exercising any of these options must rest with the debtor country. the role of the official sector is to ensure that the full menu of financing options is made known and available to the debtor, from which it then chooses. this menu should include both the easier options – such as raising new private sector money – as well as the harder ones – such as suspending payments. each of these options is backstopped by limits on imf lending, so that the " pure bail - out " option is heavily circumscribed. indeed, it is this backstop which helps provide the incentive for creditors and debtors to seek alternative, market - based solutions sooner. the imf should stand ready to assist countries, whichever of these options debtors choose to exercise, provided the appropriate prior conditions are satisfied. for example, should a country facing severe liquidity pressures decide to suspend payments temporarily, then the imf should be willing to support that decision while remedial policy measures are put in place. this support could take the form of bridging finance – so - called imf lending - into - arrears. the pre - conditions of lending - into - arrears could be designed to ensure that payments suspensions are handled in an orderly fashion – for example, that they are time - limited and equitable, and the debtor is negotiating in good faith. this would reduce uncertainty on the part of both debtors and creditors as to how the end game would be played out, thereby reducing borrowing costs. these sets of procedures represent evolution in, rather than revolution of, the international financial architecture. they are about ensuring the official sector's own actions are clear, consistent and accountable, so that they contribute effectively to the resolution of financial crises. these procedures are fully consistent with the principles of private sector involvement outlined in the imfc communique last september and more recently by the g7 finance ministers last month. the framework set out here is an attempt to begin to add some operational colour

mervyn king : the international financial system : a new partnership speech by mr mervyn king, deputy governor of the bank of england, at the 20th anniversary of the indian council for research on international economic relations, new delhi, 9 august 2001. * * * introduction it is both a great honour and a real delight to make my first visit to india in order to commemorate the 20th anniversary of icrier. i feel especially honoured to be invited to deliver the first k. b. lall lecture. the theme of my lecture will be the international financial system, and the need for a new partnership between those countries exporting capital, in normal circumstances the developed economies, and those countries which import capital, the emerging market economies. the international financial institutions set up at bretton woods over 50 years ago were designed to deal primarily with problems of current account imbalances. in recent years, however, major financial crises have originated in the capital account. why have these occurred, and how can we make them less likely in future and improve our ability to deal with them when they do occur? i can think of no better place to discuss this subject than icrier. the links between international flows of private and public finance, and the need for a restatement of the role of the international financial institutions and a clearer understanding of their modus operandi, are subjects at the heart of the work of icrier. your founder chairman, dr k b lall, whom i am delighted to say is with us this evening, worked tirelessly over the years in so many areas of international economic policy, including a period as chairman of the general agreement on tariffs and trade. your current chairman, dr i g patel, served india not only as governor of the reserve bank but also at the international monetary fund. it is a great personal pleasure to see i g, as we all know him, here tonight because i owe him a great debt for his help and support at the london school of economics during his period as director in the 1980s. and the new independent evaluation office of the imf, an important development in improving the accountability of the fund, will be led by mr montek singh ahluwalia, one of india's most distinguished economists, and the husband of your director, dr isher judge ahluwalia. india was one of the 44 countries which participated in the meetings at bretton woods which led to the creation of the international monetary fund and the world bank. the bank of england archives