Abstract
The need for heavily indebted developing countries to undertake a balance-of-payments adjustment, to generate sufficient foreign exchange for debt service, is well understood. The need for fiscal adjustment in these countries is less well understood, although several studies (Dornbusch and Fischer 1985, Reisen and van Trotsenburg 1988, Easterly 1989, and Rodrik 1990) have highlighted it. The fiscal problem arises from the fact that, although the benefits of foreign borrowing accrue to the private sector, a large share of the debt burden may rest with the public sector. A transfer of domestic resources must be made from the private sector to the public sector to finance interest and amortization payments.
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© 1993 Riccardo Faini and Jaime de Melo
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de Melo, M. (1993). Fiscal Adjustment in High-Debt Countries. In: Faini, R., de Melo, J. (eds) Fiscal Issues in Adjustment in Developing Countries. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-22790-7_6
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DOI: https://doi.org/10.1007/978-1-349-22790-7_6
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