Arbeitspapier
Preferred and non-preferred creditors
International financial institutions (IFIs) generally enjoy preferred creditors treatment (PCT). Although PCT rarely appears in legal contracts, when sovereigns restructure bilateral or commercial debts, they normally pay IFIs in full. This paper presents a model where a creditor, such as an IFI, that can commit to lend limited amounts at the risk-free rate and can refrain from lending into arrears is always repaid and adds value. The analysis suggests that IFIs and market lenders can both enhance welfare, even if banning commercial borrowing can sometimes be optimal. To maintain their status, preferred lenders should offer low cost financing in volumes that are consistent with countries' incentives to repay even in bad states. This suggests such lenders should not differentiate lending interest rates according to risk and should not participate in the restructuring of commercial debt.
- Language
-
Englisch
- Bibliographic citation
-
Series: IDB Working Paper Series ; No. IDB-WP-1215
- Classification
-
Wirtschaft
International Lending and Debt Problems
National Debt; Debt Management; Sovereign Debt
International Linkages to Development; Role of International Organizations
Socialist Institutions and Their Transitions: International Trade, Finance, Investment, Relations, and Aid
- Subject
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Preferred Creditor Treatment
Preferred Creditor Status
Sovereign Debt
Sovereign Defaults
International Financially Institutions
Emergency Financing
- Event
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Geistige Schöpfung
- (who)
-
Cordella, Tito
Powell, Andrew
- Event
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Veröffentlichung
- (who)
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Inter-American Development Bank (IDB)
- (where)
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Washington, DC
- (when)
-
2021
- DOI
-
doi:10.18235/0003109
- Handle
- Last update
-
10.03.2025, 11:42 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Cordella, Tito
- Powell, Andrew
- Inter-American Development Bank (IDB)
Time of origin
- 2021
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