The threat to the international financial system resulting from the developing-country debt problem has diminished since the initial 1982 crisis, despite halting adjustment and impaired creditworthiness in heavily indebted developing countries. The threat to the financial system has eased as commercial banks have reduced sharply the share of their assets and capital exposed to the troubled debtor countries. The countries themselves, however, are no better off. A sizable balance-of-payments adjustment has occurred in the heavily indebted developing countries, but that adjustment was concentrated-at least in quantitative terms-during the years immediately following the onset of the crisis and might have been more efficient had it been executed more gradually. Despite the adjustment that has occurred, the creditworthiness of the heavily indebted countries-as evaluated by conventional indices-has not improved. And, for reasons that this article explores, economic growth per capita has not resumed either. Copyright 1990 Western Economic Association International.