Abstract

The last decade, it appears, has spawned a new generation of sovereign crises called the liquidity crises (for example in India, Asian Tigers, Russia and Turkey). These are quite different from debt crisis (such as those in Mexico, Indonesia and Sub Saharan Africa), where repayment is impossible or near impossible. Unlike the chronic problems beset by debt crises, liquidity crises are maladies which can affect the rich and the comparatively well-heeled. They are characterised, as the name suggests, by lack of cash and can strike quite suddenly but are often cured by simple injections of cash given by a global agency or supranational under conditions and warranties. Debt crises on the other hand linger and painfully drag on.