obligations was to renegotiate loans with private international banks. The
basic idea was to stretch out the payment period for principal and interest
or to obtain additional financing on more favorable terms. Typically, however,
such debtor countries had to deal with the IMF before a consortium of
international banks would agree to refinance or defer existing loan schedules.
Relying on the IMF to impose tough stabilization policies, a process
known as conditionality, before it agreed to lend funds in excess of their
legal IMF quotas, the private banks interpreted successful negotiations
with the IMF as a sign that borrowing countries were making serious efforts to
reduce payments deficits and earn the foreign exchange needed to repay earlier
loans.7 There are four basic components to the typical IMF stabilization