A plan to prevent another developing-country debt crisis is now at the root of the latest financial troubles destabilizing economies from Ghana to Sri Lanka and Pakistan.
Scarred by the Latin American and Asian crises of the 1980s and 1990s, when dollar-denominated loans forced dozens of countries to default or restructure their debts, a wave of economists pushed a plan to remake low-income countries in the image of richer ones. Instead of borrowing in dollars and falling hostage to currency swings that could make debts unpayable, governments would issue bonds in their own currencies, like the U.S. or Japan do. If a crisis hit, they could inflate their way out of trouble or change payment terms without courts in New York or London going after their assets.
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