In many countries, and very often, situations arise when the authorities are unable to resolve the balance of payments: the upcoming payments for the supply of goods and services, as well as for past debts, are large, than current capital inflows and available reserve assets. The country is simply not able to pay for its external obligations.
This leads to late payments, complicates relations with creditors, interrupts new financing. The crisis that has arisen is called the balance of payments crisis and is shown analytically as a negative balance of payments in general, which cannot be covered this year by reducing the reserves of reserve assets, since either they are simply not enough or they cannot be used for these purposes by law. In such a situation, characterized by a sharp reduction in reserves and an increase in the balance of payments deficit, countries may resort to exceptional financing.
Exceptional financing (exceptional financing) – operations carried out by a country experiencing difficulties in financing a negative balance of payments, as agreed and with the support of its foreign partners in order to reduce this balance to a level, which can be financed by traditional means.
Exclusive financing operations can take place on any items of the balance of payments and are usually not isolated in a separate group. The most significant of them are as follows:
Debt cancellation (debt forgiveness) – a voluntary refusal of the creditor from part or the entire amount of the debt, fixed in the corresponding agreement between the creditor country and the debtor country. In the balance of payments, debt cancellation is shown as a capital transfer in the capital account; Exchange of equity debt (debt equity swap) – exchange, usually at a price below the face value, overdue debts and other debt obligations for shares of debtor country companies. Such operations can take many specific forms, but their economic meaning is one: debt obligations that cannot be covered by the debtor are exchanged by agreement with the creditor for a share in the property of the debtor; Borrowing for balance of payments (credits for balance of payments needs) – loans received by government agencies and the Central Bank from other countries in order to finance the balance of payments in exceptional situations. This group includes loans provided by the IMF. All of them are shown in the balance of payments “under the line”; Re-issuance of debt (debt rescheduling) – changing the terms of an existing contract or concluding a new agreement providing for the replacement of the originally agreed terms of payments with new ones. When reissuing, it is believed that current debt payments were made on time and financed from a new, i.e. reissued debt; Debt Payments (arrears) – a way of emergency financing of the balance of payments, in which countries – with or without the consent of the creditor – simply do not pay the amounts due for external obligations. Delayed payments are shown “under the line.