1. BAKER PLAN AND BRADY PLAN DIFFERENT FROM EACH OTHER IN TERMS OF THEIR EFFECTIVENESS? WHAT FACTORS WERE RESPONSIBLE FOR THEIR DIFFERING EFFECTIVENESS?
2. BAKER PLAN Formed by U.S Treasury James Baker in 1985 to relieve debt in the developing world by U.S. Plan identified 15 countries with relatively healthy economies but also with a large amount of debt, and suggested the World Bank and private banks provide funding while these countries undertook liberalizing structural reform. Ultimately the plan was not implemented because no consensus could be reached.
3. BAKER PLAN The plan called for; Commercial banks to lend an additional $20billion and extend loan maturity dates. Governments of industrialized nations to use the conduct of multilateral agencies like the IMF to provide fresh loans to heavily indebted countries. Debtor countries to adopt market-orientated approaches such as trade liberalization policies for promoting economic growth.
4. BRADY PLAN Introduced in early 1989 and offers a comprehensive debt restructuring package for commercial bank debt. Under the plan commercial lenders/creditors can chose from a menu of instruments including buybacks, discount exchanges for debt stock reduction, and par exchanges at reduced interest rates for debt service reduction.
5. BRADY PLAN Eurobonds issued by the government of a developing country refinancing its debt to foreign commercial banks under a Brady-type agreement. the agreement is characterized by introduction of an IMF plan and the opportunity for the creditor to exchange its debt against a set of instruments aimed at satisfying both counterparts of the deal. the main features of Brady bonds are collateralization, debt reduction, debt-equity conversion, underwriting against new money, and options on oil revenues
6. BAKER PLAN Increased Bank and Official lending to 15 heavily in-debt middle-come countries in return for commitments from them to adjust their economics in growth oriented directions. emphasized new lending to the highly indebted countries based on market conditionality. The market-oriented reforms in recipient countries are: tax reductions, privatization of state-owned enterprises, reduction of trade barriers, and investment liberalization. DIFFERENCE IN THE BAKER | BRADY PLANS
7. DIFFERENCE IN THE BAKER | BRADY PLANS BRADY PLAN Flexible than Baker by dealing with individual countries' characteristics and creditors' desires. The IMF and the World Bank should continue to assist governments in formulating and implementing appropriate economic policy programmes.
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9. REFERENCES Weak Leadership Economic Crisis Political Polarisation http://www.nl-aid.org/continent/latin-america/weak-leadership-economic-crises-and-political-polarization-what-the-international-community-can-learn-from-latin-american-regime-crises/ The Financial Directory http://financial-dictionary.thefreedictionary.com/Baker+Plan The International Monetary Fund Organisation http://www.imf.org/external/pubs/ft/cpis/2002/pdf/cpis_index.pdf http://www.rep.org.br/pdf/38-6.pdf-goodref The Brady Plan and Market base solution http://www.cato.org/pubs/journal/cj16n2/cj16n2-4.pdf Is Debt Relief Efficient? http://gsbapps.stanford.edu/researchpapers/library/RP1837.pdf Has the Market Solved the Sovereign Debt Crisis http://www.princeton.edu/~ies/IES_Studies/S83.pdf
