How to Strengthen the International Financial System by
Restructuring Sovereign Balance Sheets

Ross P. Buckley

and

Peter Dirou

The inability of developing nations to borrow in their own currency leads
to currency mismatches on their national balance sheets. These mismatches render these economies vulnerable to external shocks and are a major source of damaging volatility for the entire international financial system. This article argues why these mismatches need to be remedied, and how the multilateral development banks and the Paris Club can take the lead in doing so.