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The risk management of assets and liabilities by developing countriesGreater access to the international financial markets has bestowed manybenefits on developing countries but it has also exposed them to the vicissitudes of these markets In addition to the macroeconomic challenges posed by large potentially volatile flows the sizable external foreign currency debt of many developing countries makes them vulnerable to swings in international exchange rates and interest rates and often they are tempted to speculative currency attacksIndeed prudent macroeconomic policies have at times been compromised by the fiscal consequences of losses associated with these exposures Most recent of such policies is the one embarked upon by RussiaRussia had defaulted on domestic debt devalued the rubble and frozen payments on some previous Soviet-era commercial debt The US and a few European banks which lost some 10 billion to the debt default alone vowed never to go near Russia again Yet it is striking to learn through Business Week magazine that due to a change in macro-economic policies Russia has been able to have some their defaulted debts forgiven Now many of the same banks that vowed not to do business in Russia are hailing the administration of this countrys first step toward a return to international bond markets in the form of a massive issue of restructured commercial debt These financial pundits are hoping for an unprecedented economic rebound The main economic and financial initiative that has encouraged investors is that Russia has the best performing fixed income market in the world for this year as well as last year JP Morgans Emerging Markets Benchmark Index reported this performance Other areas of policy changes involved the devaluation of the rubble at a time when oil prices have surged Russia has also recently restructured 32 billion in soviet- era commercial debt Banks wrote off 106 billion and Russia issued two new trenches ie an 182 billion30-year issue and a 28 billion10-year issue for the balanceAs other defaulted
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