[Former socialist countries] The combined debts of socialist countries to the West stood at over US$ 115,000 million in 1987. This was nearly 30% higher than three years before. The debts are principally to private commercial sources, to Western governments, and to the World Bank and the International Monetary Fund. They were largely incurred for the importation of food and agricultural products, and for Western technology, fuels and energy raw material. Consumer goods are also imported. The degree of indebtedness varies considerably from one socialist country to another. In 1983, the figures were: Albania $25 million; Bulgaria $3,300 million; Czechoslovakia $2,750 million; former GDR $10,750 million; Hungary $7,250 million; Poland $30,900 million; Yugoslavia $20,500 million, plus $3,400 million owed by Comecon banks. In 1990 Poland owed about $41 billion, Hungary $21 billion and Bulgaria $9 billion to foreign creditors.
[Developing countries] Budget deficits in the developing countries are steadily increasing, due to developmental and energy costs on the one hand, and their foreign trade vulnerability on the other. Many developing countries are running balance-of-payments deficits while carrying the burden of large foreign debt as well. The unwillingness or inability of the industrialized world to help has made more noticeable the inadequate levels of cooperation among the less developed countries and regions.
For example, nearly half of the national budget of the Philippines goes to debt payment. More than $20 billion was paid in debt servicing interest (60% of total export earnings) to international banks in the period 1987-1992. India foreign debt in 1989 was around $62 billion. Whilst the bulk of the borrowings are constituted by long term, concessional loans from the multilateral agencies, there is increasing reliance on short term commercial sources, with the amount of untied loans getting less at the same time as the terms for market related loans are becoming less favourable. Despite the fact that between 1972 and 1988, more than $176 billion was paid by Brazil in debt servicing, the country's total foreign debt in 1989 was $112.3 billion. Due to fluctuating interest rates imposed by international bankers, Brazil and other countries suffered enormous losses. Contracts that were signed in 1976 at 6.25% interest may have had their interest rates increased to 21.5% by 1981. During the period of 1973 to 1985, Brazil paid additional interest of $34.5 billion.
2. The root cause of the difficulties encountered by debtors in meeting their external payments lies with the policies of the countries themselves. And, even if external shocks are an important factor in explaining the emergence of external financial difficulties, an appropriate national economic policy characterized by outward orientation and reliance on market forces would have allowed countries to cope with these disturbances (as has been the case with some countries).