Shortcomings in the market for developing country debt

John Wakeman-Linn

No 268, Policy Research Working Paper Series from The World Bank

Abstract: The author recommends ways of improving incentives for developing countries to repay future loans : 1) by finding ways to increase the penalties for default, or making the penalties more certain. This would increase the debtor countries'willingness to pay, which would benefit all parties, 2) by studying how to use existing multinational and international organizations to increase the flow of relevant information to potential creditors, 3) by increasing precommitment of funds through increased penalties for default and other approaches. IMF contingency programs are already used extensively to establish some form of precommitment. Further use of international organizations along these lines may be possible. Mutually beneficial contracts are not currently possible because precommitment is not enforceable.

Keywords: Environmental Economics&Policies; Financial Intermediation; Economic Adjustment and Lending; Banks&Banking Reform; Economic Theory&Research (search for similar items in EconPapers)
Date: 1989-09-30
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