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Debt Reduction and New Loans; A Contracting Perspective


  • Aasim M. Husain
  • John A. Carlson
  • Jeffrey A. Zimmerman


International debt contracts can incorporate—at least implicitly—contingencies governing debt reduction. This paper examines a series of debt contracts that allow for the possibility of rescheduling, forgiveness, and rescheduling with forgiveness. The contract with both rescheduling and forgiveness permits a higher credit ceiling than other types of debt contracts, and contains features found in the HIPC and other recent debt reduction initiatives. If an adverse state of nature occurs, some of the debt is forgiven, a portion is rescheduled, and the remainder is repaid. At the same time, the debtor country is a net recipient of new loans.

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  • Aasim M. Husain & John A. Carlson & Jeffrey A. Zimmerman, 1997. "Debt Reduction and New Loans; A Contracting Perspective," IMF Working Papers 97/95, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:97/95

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    Cited by:

    1. Yapo, Leonce, 2002. "D.terminants de l'endettement ext.rieur des PPTE: Cas de la C.te d'Ivoire," WIDER Working Paper Series 014, World Institute for Development Economic Research (UNU-WIDER).

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