It is not easy to quantify, but it is noteworthy that the number of sovereign defaults has declined quite sharply during the 1990s. If sovereign risk is mis-priced by private capital markets, this sows the seeds of future crises. The increased provision of official finance would proceed hand-in-hand with an increased incidence of crises. Second, to be effective, a lender of last resort must have the ability to extend sufficient resources that the market has no doubt whatsoever about the ability to provide whatever it takes to deal with the immediate crisis. The IMF is not in that position. There is no political commitment to provide the IMF with unlimited funds. As the finance ministers and central bank governors representing all IMF member countries said in their communiqué of the IMFC last September in Prague: "The Committee notes that Fund resources are limited and that extraordinary access should be exceptional …". In practice, however, exceptional access has often been more the norm in recent years. Normal access is typically defined as 300% of IMF quota. During the Asian crisis, Korea's programme was almost 2000% of quota and Thailand's over 500%. More recently, Turkey's programme was over 1500% of quota and Argentina's 500%. If creditors and debtors continue to believe that exceptional access is readily available, then international credit will be over-extended and the incidence of crisis will increase.
Mervyn King: The international financial system: a new partnership Speech by Mr Mervyn King, Deputy Governor of the Bank of England, at the 20th Anniversary of the Indian Council for Research on International Economic Relations, New Delhi, 9 August 2001. *  *  *  Introduction It is both a great honour and a real delight to make my first visit to India in order to commemorate the 20th Anniversary of ICRIER. I feel especially honoured to be invited to deliver the first K. B. Lall Lecture. The theme of my lecture will be the international financial system, and the need for a new partnership between those countries exporting capital, in normal circumstances the developed economies, and those countries which import capital, the emerging market economies. The international financial institutions set up at Bretton Woods over 50 years ago were designed to deal primarily with problems of current account imbalances. In recent years, however, major financial crises have originated in the capital account. Why have these occurred, and how can we make them less likely in future and improve our ability to deal with them when they do occur? I can think of no better place to discuss this subject than ICRIER. The links between international flows of private and public finance, and the need for a restatement of the role of the international financial institutions and a clearer understanding of their modus operandi, are subjects at the heart of the work of ICRIER.