Abstract
Drawing on the relevant literature on the link between economic growth and external debt accumulation of less developed countries (LDCs), this study seeks to identify the variables leading countries to experience debt servicing difficulties. Discriminant analysis was used to distinguish between the rescheduling and non-rescheduling countries. The available data are the values of finanical ratios for 75 LDCs in 1988. The common log and sin transformation were applied to the ratios, resulting in variables that satisfied the discriminant function model. Ten variables represcenting debt burden, foreign exchange position and domestic economy situation were found significant in exploring the rescheduling decision. The model can be useful for both the financial institutions and the borrowing countries.
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