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Financial Stability Paper No 4: Reforming the IMF's Lending-into-Arrears Framework

Author

Listed:
  • Paul Bedford

    (Bank of England)

  • Gregor Irwin

    (Bank of England)

Abstract

Episodes of sovereign default are typically associated with significant economic costs. The International Monetary Fund can help to mitigate these costs in a variety of ways, including by lending into arrears. Careful design of the broad policy framework governing the Fund’s involvement can help to ensure it has the maximum beneficial impact, without distorting the incentives of either the defaulting country or its creditors. This paper aims to identify some of the issues that are relevant to the design of such a framework, and which might helpfully be considered as part of the forthcoming review of the Fund’s lending-into-arrears policy.

Suggested Citation

  • Paul Bedford & Gregor Irwin, 2008. "Financial Stability Paper No 4: Reforming the IMF's Lending-into-Arrears Framework," Bank of England Financial Stability Papers 4, Bank of England.
    • Handle: RePEc:boe:finsta:0004
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    References listed on IDEAS

    as
    1. Biana De Paoli & Glenn Hoggarth & Victoria Saporta, 2006. "Financial Stability Paper No 1: Costs of Sovereign Default," Bank of England Financial Stability Papers 1, Bank of England.
    2. Lucio SIMPSON, 2006. "The Role Of The Imf In Debt Restructurings: Lending Into Arrears, Moral Hazard And Sustainability Concerns," G-24 Discussion Papers 40, United Nations Conference on Trade and Development.
    3. Thomas, Jonathan P., 2004. "Bankruptcy proceedings for sovereign state insolvency and their effect on capital flows," International Review of Economics & Finance, Elsevier, vol. 13(3), pages 341-361.
    4. Adam Lerrick, 2005. "A Leap of Faith for Sovereign Default: From IMF Judgment Calls to Automatic Incentives," Cato Journal, Cato Journal, Cato Institute, vol. 25(1), pages 25-31, Winter.
    5. Oya Celasun & Xavier Debrun & Jonathan D. Ostry, 2006. "Primary Surplus Behavior and Risks to Fiscal Sustainability in Emerging Market Countries: A "Fan-Chart" Approach," IMF Staff Papers, Palgrave Macmillan, vol. 53(3), pages 1-3.
    6. Mr. Philippe D Karam & Mr. Douglas Hostland, 2005. "Assessing Debt Sustainability in Emerging Market Economies Using Stochastic Simulation Methods," IMF Working Papers 2005/226, International Monetary Fund.
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    Cited by:

    1. repec:bdi:opques:qef_143_01 is not listed on IDEAS
    2. Mr. Marco Committeri & Francesco Spadafora, 2013. "You Never Give Me Your Money? Sovereign Debt Crises, Collective Action Problems, and IMF Lending," IMF Working Papers 2013/020, International Monetary Fund.
    3. Mislav Brkic, 2015. "Labor Market Duality and the Impact of Prolonged Recession on Employment in Croatia," Croatian Economic Survey, The Institute of Economics, Zagreb, vol. 17(1), pages 5-45, June.

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    JEL classification:

    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

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