Abstract
The “Current Account crisis” is a particular type of external debt crisis that affects mostly low-income developing countries. It is characterized by a huge deficit in the current account balance which provokes a Balance of payments deficit and a currency crisis. A current account crisis occurs generally in low-income developing countries. It is most of all the result of bad macroeconomic policies. These countries have a large current account deficit, principally due to a trade deficit – because they are mostly net importers - and a fiscal deficit. Moreover, they generally have a high rate of inflation, in part because they try to finance their growing deficit by monetization. That leads to a loss of international price competitiveness. Indeed, they are under fixed exchange rate and the inflation makes the rate overvalued. Furthermore, the government dominates the economy. It is the major borrower; the private sector is underdeveloped and inactive. The consequence is a limited capital flow and the external debt is mostly a public debt.
