ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

Debt crisisSubscribe to Debt crisis

The Challenge of LDC Debt

A challenge set by the Covid-19-induced economic crisis that would be difficult to address is the external debt crisis engulfing developing countries. While the G-20 with its Debt Service Suspension Initiative appeared to recognise the problem, the evidence indicates that the international community is unwilling to do what is needed. There are enough proposals on the table, but inadequate commitment among those sitting around it.

Concentration, Collusion and Corruption in India’s Banks

Why would companies, for whom costs rise with higher interest rates, choose to amass credit as interest rates rise? Were more and more loans taken with the understanding that default would be inevitable? Only a commission of inquiry with a specifi c mandate to understand the years of loose lending by banks in India can answer these and other uncomfortable questions. These answers are needed in the interest of securing our economy, and indeed our democracy.

Determinants of Sovereign Defaults

Developing-country defaults on their external debt repayments are a function of both their 'willingness to pay' as well as their 'ability to pay'. While the ability to repay can be captured by economic factors like the growth rate of the economy and external shocks, willingness to repay is more difficult to measure. In this paper, it is emphasised that political factors are important determinants of the willingness to repay and should be treated as an explanatory variable explicitly. A multivariate probit model is estimated that tests the hypothesis that the probability of default is inversely related to the level of democracy in the debtor country. It is shown that the evidence doesn't support the hypothesis.

Restructuring Argentina's Debt: How Is It Going to Happen?

In the case of Ecuador about a year ago, to effect sovereign debt restructuring, lawyers turned to a solution embedded in the bond contracts themselves, using what is termed as an 'Exit Consent' offer. The lessons of the Ecuador experience are very relevant to Argentina today as a possible way to restructure its debt without the need for either a bail-out brokered by, say, the IMF or an international bankruptcy regime.
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