International payments imbalances since the 1970s

Despite the considerable tensions that emerged over the period and the absence of any considered and substantial reform, the international payment system was able to continue functioning without any further traumatic breakdowns after that of August 1971. This does not mean that problems did not arise, but rather that they were solved in some way, albeit often with partial, fortuitous or provisional adjustments. The problems that have emerged since the 1970s can be grouped into those specific to relationships between some groups of countries and those that concern all countries. Among the former are: the problem of disequilibria in countries that import raw materials (and oil in particular) owing to the rise in their prices during the 1970s; the problem of the foreign debt of developing countries; and that of the foreign debt of the East European countries around 1990, the foreign exchange and financial crises that hit some South-East Asian countries, Russia and Brazil in 1997–9 and Argentina in 2001–2. The more general problem concerns the strains that have been caused by speculative capital movements.

The sharp rise in raw materials prices in the 1970s created large balance of payments disequilibria. The IMF partially dealt with these by providing new special facilities (i.e. financing arrangements) and increasing the limit on drawings on existing funds. The conditional nature of the credit, however, hindered more extensive use of the Fund as an intermediary to recycle the balance of payments surpluses accumulated by oil-exporting countries.