The chronic external imbalance led to the two adjustment programmes negotiated with the International Monetary Fund in 1978 and 1983. Over the last 15 years, cheaper and more accessible financing afforded by monetary union led to a strong expansion in credit, and to a lesser extent, the contraction of private saving.
The increase in indebtedness and decrease in saving were mainly used to finance consumption and low-return investments, and therefore did not result in the expansion of the economy’s growth potential. The strong increase in private spending translated into a deviation of resources to the non-tradable sector and persistent current account deficits. These imbalances were aggravated by unsustainable budgetary policies.