TITLE:
Financing Developing Country Debt: A Sovereign Borrowing Entity Proposal
AUTHORS:
David J. Moore, Roger W. Clark, George C. Philippatos
KEYWORDS:
Sovereign, Debt, Default, Restructuring, IMF
JOURNAL NAME:
Journal of Financial Risk Management,
Vol.3 No.3,
August
29,
2014
ABSTRACT: This paper proposes
the creation of a Sovereign Borrowing Entity (SBE) under the auspices of the
International Monetary Fund (IMF) and other International Financial
Institutions (IFIs). The SBE guarantees bond issuances by developing nations,
packages them in relatively small denominations, and auctions them to the
public. Should a developing debtor country fail to pay its debt, the SBE would raise
funds through a punitive tariff on all exports administered by the IMF member
nations. We develop a theoretical model of the proposed Sovereign Borrowing
Entity (SBE) and provide viability evidence using export and debt data from the
World Bank. It is our hope that this paper will encourage further dialogue and
research on financing developing country debt in a more effective manner.