Increases in oil prices forced many poorer nations' governments to borrow heavily to purchase politically essential supplies.
Economist Jeff Rubin agrees with this stance on the basis that the money could have been used for basic human needs and says it is odious debt.
Under the new system, if the government spent more than it earned through taxation in a given year, it needed to cover the gap with US dollars, rather than by simply printing more money.
In a similar fashion to Black Wednesday, investors began to sell the Argentine currency, betting it would become worthless against the US dollar when the inevitable inflation started.
Vulture funds who had acquired debt bonds during the crisis, at very low prices, asked to be repaid immediately.
The exchange was not accepted by the rest of the private debt holders, who continue to challenge the government to repay them a greater percentage of the money which they originally loaned.
In 2016, Argentina cancelled its debt with the holdout creditors, which received returns in the order of the hundreds of percentage points.
At the same time, holding foreign exchange reserves is a strong protective measure against an external debt crisis.
[7][8] Under the Jubilee 2000 banner, a coalition of groups joined together to demand debt cancellation at the G7 meeting in Cologne, Germany.
As a result, finance ministers of the world's wealthiest nations agreed to debt relief on loans owed by qualifying countries.
[9] A 2004 World Bank/IMF study found that in countries receiving debt relief, poverty reduction initiatives doubled between 1999 and 2004.
Burkina Faso drastically reduced the cost of life-saving drugs and increased access to clean water.
[10] In 2005, the Make Poverty History campaign, mounted in the run-up to the G8 Summit in Scotland, brought the issue of debt once again to the attention of the media and world leaders.
To assist in the reinvestment of released capital, most international financial institutions provide guidelines indicating probable shocks, programs to reduce a country's vulnerability through export diversification, food buffer stocks, enhanced climate prediction methods, more flexible and reliable aid disbursement mechanisms by donors, and much higher and more rapid contingency financing.
When the 2004 Indian Ocean earthquake and tsunami hit, the G7 announced a moratorium on debts of twelve affected nations and the Paris Club suspended loan payments of three more.
[12] By the time the Paris Club met in January 2005, its 19 member-countries had pledged $3.4 billion in aid to the countries affected by the tsunami.
[15] The traditional meeting of G8 finance ministers before the summit took place in London on 10 and 11 June 2005, hosted by then-Chancellor Gordon Brown.
The ministers stated that twenty more countries, with an additional US$15 billion in debt, would be eligible for debt relief if they met targets on fighting corruption and continue to fulfill structural adjustment conditionalities that eliminate impediments to investment and calls for countries to privatize industries, liberalize their economies, eliminate subsidies, and reduce budgetary expenditures.
[16] For example, in Zambia, structural adjustment reforms of the 1980s and early 1990s included massive cuts to health and education budgets, the introduction of user fees for many basic health services and for primary education, and the cutting of crucial programs such as child immunization initiatives.