Buybacks of LDC Debt and the Scope for Forgiveness
AbstractThis paper explains why a debtor country may be eager to spend foreign exchange reserves on the retirement of its cross-border obligations at market prices. A simple two-period framework shows that such spending can be profitable to both the debtor countries and their foreign creditors, and thereby provides an explanation as to why the so-called buybacks of LDC debt actually take place. An extended version of the basic framework shows how buybacks can be induced by having commercial creditors grant debt forgiveness, and why debt forgiveness thereby becomes an optimal strategy for creditors to follow ...
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Bibliographic InfoPaper provided by OECD Publishing in its series OECD Development Centre Working Papers with number 39.
Date of creation: Jul 1991
Date of revision:
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