Headline: Burdens that can’t be passed on Source: Euromoney Date: September 2001 The Paris Club of official bilateral creditors is promoting the view that holders of sovereign bonds should take their share of the burdens when borrowers need rescuing from default. Jerome Booth argues that this burden-sharing dogma flies in the face of insights that can be gleaned from history and conflates what is essentially politically-motivated lending with market-driven lending. It will, he argues, inevitably damage the debtors it is ostensibly designed to help The actions that led to this state of affairs emanated from the official sector and have been driven by the desire to cut foreign aid budgets, though this motivation is not fully transparent. Effectively, bond investors are being encouraged to contribute to the resolution of emerging-market balance-of-payments crises by assenting to bond restructurings. Although bond markets can and do design their own voluntary solutions to such crises, the official sector’s involvement is unwelcome and unnecessary. |