Interest on index linked debt instruments

Debt instruments linked to a foreign currency

C. Financial issues capital flows, aid and debt

Globalization (trade, capital, employment, environment, etc.), chances and risks Debt problem

Where realistic debt restructuring scenarios indicate capital shortfalls, across the board conversion of bank debt into equity will be necessary. And where this does not suffice, banks will need immediate capital injections by their governments.

They may provide capital in the form of debt or equity participation via investment funds.

In addition to debt, capital is also provided to infrastructure projects in the form of equity.

The pro cyclical boom bust cycles of private capital inflows and outflows underscore the need for developing market institutions and instruments that encourage more stable capital flows.

This suggests that net private borrowing using debt instruments has been rather small over this recent period.

Moreover, some debtor countries which have gone through debt restructurings soon resumed their access to capital markets.

Lower interest rates on loans are available in capital markets to borrowers who have ample debt service coverage , which is defined as total revenues available for debt service as a percentage of the required debt service.

Debt capital usually represents the main source of funding for infrastructure projects implemented under the project finance modality.

In issuing contingent capital, banks would have to pay a higher interest rate than they would on ordinary long term debt, because debt investors will face the true cost of capital, not the government subsidized cost. Over time, however, the interest rate premium is likely to be small, because higher capital requirements and contingent capital should significantly reduce the likelihood of ever reaching the triggers.

Debt not only caused an outflow of capital to pay the principal and interest on external debt, but also hindered efforts to attract foreign direct investment and promote economic activity, a fact not reflected in the debt flow approach.

Along with a durable solution to the debt situation of developing countries, the question of capital flows must be addressed.

The notable exceptions to this trend are countries that manage cross border capital flows, especially the corporate sector s exposure to foreign currency debt. Indeed, certain types of capital flow management including limiting domestic debt denominated in foreign currency for both firms and households have been shown to increase resilience.

The host country proposal would probably cost the Organization less in debt servicing than would direct borrowing on the capital markets.

Further, debt sustainability is about a country's ability to pay in the context of becoming an active partner in global capital markets.

The issues of debt, capital flows and investment remained crucial to the success of international initiatives and cooperation for growth and development.

The third assumption is that the United Nations underestimated the flight of capital and the erosion of growth due to external debt servicing.

Capital account regulations can provide space for more active counter cyclical policies to smooth spending and improve external debt profiles of developing countries.

Emphasizes the special importance of a timely, effective, comprehensive and durable solution to the debt problems of developing countries, since debt financing and relief can be an important source of capital for economic growth and development

Under Chapter 11, companies with a solid underlying business generally swap debt for equity. Old equity holders are wiped out and old debt claims are transformed into equity claims in the new entity which continues operating with a new capital structure. Alternatively, the debt holders can agree to reduce the face value of debt, in exchange for some warrants.

2. Emphasizes the special importance of a timely, effective, comprehensive and durable solution to the debt problems of developing countries, since debt financing and relief can be an important source of capital for economic growth and development

2. Emphasizes the special importance of a timely, effective, comprehensive and durable solution to the debt problems of developing countries, since debt financing and relief can be an important source of capital for economic growth and development

Options include international debt financing, domestic tax revenue and user fees, borrowing in domestic capital markets, and public private partnerships for water related investments.

Banks serve a special function in the economy that does warrant a special role for the government not in setting pay, but in imposing effective capital requirements. Higher and pro cyclical equity capital requirements on banks, combined with a requirement to raise contingent long term debt debt that converts into equity in a crisis is a better way forward.

26. We emphasize the high importance of a timely, effective, comprehensive and durable solution to the debt problems of developing countries, since debt financing and relief can be an important source of capital for development. To this end

One approach advocated in the consultations was to take forward a set of principles for stable capital flows and fair debt restructuring in emerging markets .

The solution to breaking the nexus between sovereign debt crises and banking crises is straightforward limit banks to lending where evaluation of borrowers willingness and ability to repay isn t a great leap in the dark. This means no cross border sovereign debt (or esoteric instruments, such as collateralized debt obligations).

Emphasizes the great importance of a timely, effective, comprehensive and durable solution to the debt problems of developing countries since debt financing and relief can be an important source of capital for economic growth and development, and also emphasizes that creditors and debtors must share responsibilities for preventing unsustainable debt situations

Emphasizes the high importance of a timely, effective, comprehensive and durable solution to the debt problems of developing countries, since debt financing and relief can be an important source of capital for economic growth and development, and emphasizes that creditors and debtors must share responsibilities for preventing unsustainable debt situations

Banks loaded up on the relatively high yield debt of countries like Greece because they had to set aside very little capital. But, while the debt was highly rated, how could anyone objectively assess unsecured and virtually unenforceable obligations?

Bearing in mind the importance of microfinance instruments such as credit, savings and related business services in providing access to capital for people living in poverty,

Bearing in mind the importance of microfinance instruments such as credit, savings and related business services in providing access to capital for people living in poverty,

The task required improvements to the domestic financial structure and the ability to develop suitable investment instruments and to issue significant amounts of domestic currency debt.

Moreover, Spain s debt with the ECB s TARGET settlement system rose by 55 billion ( 72 billion) between February and March, because capital outflows of that amount had to be compensated. Since July 2011, Spain s TARGET debt has grown by 199 billion.

(c) Reduce barriers to long term, non debt creating capital flows, especially FDI, and the costs to migrants of sending their remittances through sanctioned institutional channels.

In Africa, as in other parts of the world, the debt problem and resource requirements are inextricably linked to the capacity for capital accumulation and growth.

(e) Account, to be taken, in addition to capital repayments, of excessive interest, costs and commissions already paid, so as to reduce or cancel the debt

17. Financial difficulties experienced by third States as a result of sanctions comprise those related to suspended capital flows, interrupted current transfers and overdue debt servicing.

Furthermore, LDC s external debt burden continues to be a constraint on their capacity to accelerate development it limits and dampens prospects for larger private capital inflows.

(e) Dependence on foreign sources of finance remittances, capital and financial inflows as a percentage of GNP, or total external debt as a percentage of GNP.

7. Emphasizes the great importance of a timely, effective, comprehensive and durable solution to the debt problems of developing countries since debt financing and relief can be an important source of capital for economic growth and development, and also emphasizes that creditors and debtors must share responsibilities for preventing unsustainable debt situations

The major question today should be whether the failure of capital markets (and the implications for government debt) after 2007 has been as severe as during the Great Depression. At the moment, there has not been widespread revulsion against all government debt, and some countries today clearly have better access than others to capital markets, enabling them to finance their deficits externally.