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In this paper it is argued that the willingness of debtors to make external debt-service payments reflects, in part, their inability to credibly and permanently suspend debt service. The benefits of a credible debt-service suspension would include increased private investment. But this would, in turn, tend to create conditions in which it would then be optimal for the government to resume payments. Thus, debt remains a threat even after the announcement of suspension of debt service. It follows that the expected benefits of such a suspension are limited and may be offset by penalties imposed by creditors.
Debt service payments --- Debt service --- Debts, External --- Exports and Imports --- External debt --- Income --- International economics --- International Lending and Debt Problems --- Macroeconomics --- Personal income --- Personal Income, Wealth, and Their Distributions
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Many countries among the Baltics, Russia and other CIS states are increasingly borrowing on international capital markets, a development that generally reflects their success in achieving financial stabilization. In view of the low level of domestic saving and large capital requirements, recourse to foreign borrowing may of course generate significant benefits for these economies in transition. However, the rapid increase in external debt suggests that consideration also needs to be given to the risks from too high a dependence on foreign saving, including inter alia risk of the postponement of needed structural reforms.
Exports and Imports --- Public Finance --- International Lending and Debt Problems --- Debt --- Debt Management --- Sovereign Debt --- International Investment --- Long-term Capital Movements --- International economics --- Public finance & taxation --- Finance --- External debt --- Debt service --- Public debt --- Foreign direct investment --- Debt service payments --- Balance of payments --- Debts, External --- Debts, Public --- Investments, Foreign --- Russian Federation
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This paper models the resource implications of debt relief provided to low-income countries (LICs). Obtaining debt relief does not necessarily lead to individual aid-dependent countries receiving more overall resources from the donor community. Preliminary cross-section estimates suggest that debt relief provided to low-income countries in the period 1996 2000 neither crowded out other non-debt relief-related aid flows to the debtors concerned nor created significant extra net resources for those countries. While it is too early to fully assess the resource implications of the enhanced HIPC Initiative, this paper provides a possible approach to such an evaluation.
Exports and Imports --- Financial Risk Management --- Debt --- Debt Management --- Sovereign Debt --- International Lending and Debt Problems --- Foreign Aid --- Finance --- International economics --- Debt relief --- Debt reduction --- Aid flows --- Foreign aid --- Debt service payments --- Asset and liability management --- External debt --- Debts, External --- Economic assistance --- International relief --- Debt service --- United States
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This paper provides updated information on the external debt problem of sub-Saharan Africa. Between 1980 and 1990 the region’s external debt more than tripled, to US$171 billion, while debt service payments and rescheduling rose by more than 150 percent to US$20 billion. In addition, the region continues to qualify as severely debt-distressed. During the last few years the region has benefitted from several new debt initiatives, including a substantial increase in debt cancellation by bilateral creditors and the general application of Toronto terms for debt rescheduling. There are also proposals for further debt assistance, including more liberal rescheduling terms, broader debt forgiveness, and consolidating debt relief and aid generation activities.
Exports and Imports --- Financial Risk Management --- Macroeconomic Aspects of International Trade and Finance: General --- Comparative Studies of Particular Economies --- International Lending and Debt Problems --- Debt --- Debt Management --- Sovereign Debt --- International economics --- Finance --- Debt service --- External debt --- Debt service payments --- Debt relief --- Public and publicly-guaranteed external debt --- Asset and liability management --- Debts, External --- United States
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The purpose of this paper is to analyze the argument that debt relief would increase the incentive of a debtor country to make an adjustment effort (to invest) and that for this reason creditors may benefit by granting relief. It is shown that there are actually opposing incentive effects of debt relief and that the argument could be valid in particular circumstances. A distinction is made between exogenous and endogenous relief, the latter compelled by low capacity to pay caused by low investment earlier.
Banks and Banking --- Consumption --- Debt Management --- Debt relief --- Debt service payments --- Debt service --- Debt --- Debts, External --- Economics --- Exports and Imports --- Finance --- Financial Risk Management --- Interest rates --- Interest Rates: Determination, Term Structure, and Effects --- International economics --- International Lending and Debt Problems --- Macroeconomics --- Macroeconomics: Consumption --- Real interest rates --- Saving --- Sovereign Debt --- Wealth
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This paper outlines a procedure for calculating the cash value of “menu items” in debt restructuring proposals, including par and non-par exchanges, with enhancements consisting of either interest or principal guarantees. It is argued that under certain plausible assumptions interest and principal guarantees are directly equivalent to cash buy-backs. Using these assumptions, formulas to calculate the exchange ratios, resource requirements, interest rates, and net debt reduction for particular menu items are derived. It is shown that there is not a direct relationship between the exchange discount and the market price.
Currencies --- Debt Management --- Debt reduction --- Debt restructuring --- Debt service payments --- Debt service --- Debt --- Debts, External --- Exports and Imports --- Finance --- Financial Risk Management --- Government and the Monetary System --- Interest payments --- International economics --- International Lending and Debt Problems --- Monetary economics --- Monetary Systems --- Money and Monetary Policy --- Money --- Payment Systems --- Regimes --- Sovereign Debt --- Standards
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This paper examines Sri Lanka’s Request for Extension of Repurchase Expectations. The Sri Lankan authorities request an extension of repurchase expectations arising in the remainder of 2005, in the amount of SDR 74,162,500. The extension would have the effect of moving the repurchase expectations to an obligations basis, with each amount falling due exactly one year after the expectation date. The authorities have also expressed their desire to resume discussions on the Poverty Reduction and Growth Facility (PRGF)/EFF-supported program.
Banks and Banking --- Exports and Imports --- Natural Disasters --- Trade: General --- International Investment --- Long-term Capital Movements --- Monetary Policy --- International Lending and Debt Problems --- Climate --- Natural Disasters and Their Management --- Global Warming --- International economics --- Banking --- Natural disasters --- Imports --- External position --- International reserves --- Exports --- Debt service payments --- International trade --- Central banks --- External debt --- International finance --- Foreign exchange reserves --- Debt service --- Sri Lanka
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This paper discusses the Heavily Indebted Poor Countries (HIPC) Initiative in the perspective of sizable historical debt relief and large positive net resource flows to HIPCs. It argues that, by substantially reducing HIPCs’ debt stocks and debt service payments, the Initiative provides a solid basis for debt sustainability and room for increased social spending. For poverty reduction, HIPC relief is important but broader international support is needed. The paper maintains that, as experience has shown, external support can be effective only if it reinforces sound policies implemented by HIPCs themselves. Thus, debt relief and official development assistance are critical as “help for self-help.”.
Exports and Imports --- Financial Risk Management --- Social Services and Welfare --- International Lending and Debt Problems --- Foreign Aid --- Macroeconomic Analyses of Economic Development --- Debt --- Debt Management --- Sovereign Debt --- Government Policy --- Provision and Effects of Welfare Program --- Finance --- International economics --- Social welfare & social services --- Debt relief --- Debt reduction --- Debt service --- Debt service payments --- Poverty reduction strategy --- Asset and liability management --- External debt --- Poverty --- Debts, External --- United States
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The paper analyzes the evolution of Mexico’s approach to commercial bank debt restructuring since the outbreak of the 1982 debt servicing problems. It discusses the key elements of the approach, their implementation, and their interaction with developments in the “international debt strategy.” It focusses, in particular, on factors contributing to the emergence of comprehensive market-based debt and debt service reduction operations. Together with the sustained implementation of appropriate economic policies, these operations have contributed to Mexico’s return to voluntary international capital market financing. The paper discusses the major aspects of this market re-entry process.
Asset and liability management --- Banking --- Banks and Banking --- Banks and banking --- Banks --- Bonds --- Debt Management --- Debt management --- Debt reduction --- Debt service payments --- Debt service --- Debt --- Debts, External --- Depository Institutions --- Exports and Imports --- External debt --- Finance --- Financial institutions --- Financial Risk Management --- General Financial Markets: General (includes Measurement and Data) --- International economics --- International Financial Markets --- International Lending and Debt Problems --- Investment & securities --- Investments: Bonds --- Micro Finance Institutions --- Mortgages --- Sovereign Debt --- Mexico
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In an economy with a debt overhang, investment depends on expected tax rates. On the other hand, expected tax rates depend on the debt’s face value. Therefore investment depends on the face value of debt. I show that this may lead to a positive or negative association between debt and investment depending on the degree of international capital mobility and attitudes toward risk. There may also exist multiple equilibria; with high and low investment levels. The paper explores the desirability of debt reduction in this environment. First, it characterizes circumstances in which debt reduction is desirable from the collective point of view of the creditors. Second, it formulates the forgiveness decision as a noncooperative game among creditors and explores the scope for debt reduction as an outcome of this game.
Asset and liability management --- Capital market --- Debt Management --- Debt reduction --- Debt relief --- Debt service payments --- Debt service --- Debt --- Debts, External --- Exports and Imports --- External debt --- Finance --- Finance: General --- Financial institutions --- Financial Instruments --- Financial markets --- Financial Risk Management --- General Financial Markets: General (includes Measurement and Data) --- Institutional Investors --- International economics --- International Lending and Debt Problems --- Investment & securities --- Investments: Stocks --- Non-bank Financial Institutions --- Pension Funds --- Securities markets --- Sovereign Debt --- Stocks --- Peru
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