Debt Reduction for Poverty Eradication in the Least Developed Countries: Analysis and Recommendations on LDC Debt

Debt , Poverty, Economic development, Foreign aid , Debt sustainability

Debt and Health

Debt problems in the UK have recently become much more severe, especially for the lowest income groups, and we examine here their impact on health, using data from the national Families´ and Children´s Survey (FACS). We model the relationship between debt and health as a simultaneous two-way interaction, and find that debt levels have a negative effect on both physical and psychological health. We find that debt repayment structure, defined as the percentage of debt borrowed in high-interest categories, has an impact on health independent of the level of debt. The interaction between debt and health may aggravate the poverty trap, by pushing heavily-indebted low-income people into ill-health, which then makes it difficult for them to acquire or hold on to the steady jobs needed to ease their debt problems. We also find that worry has a negative influence on debt management capacity, and thence on health, which makes it more difficult for those caught in a debt trap to escape from it. Membership of credit unions tends to reduce worry, however, and thereby may facilitate escape from the debt-ill health spiral

Sovereign Debt in Advanced Economies: Overview and Issues for Congress

[Excerpt] Sovereign debt, also called public debt or government debt, refers to debt incurred by governments. Since the global financial crisis of 2008-2009, public debt in advanced economies has increased substantially. A number of factors related to the financial crisis have fueled the increase, including fiscal stimulus packages, the nationalization of private-sector debt, and lower tax revenue. Even if economic growth reverses some of these trends, such as by boosting tax receipts and reducing spending on government programs, aging populations in advanced economies are expected to strain government debt levels in coming years. High levels of debt in advanced economies are a new global concern. High public debt levels have become unsustainable in three Eurozone countries: Greece, Ireland, and Portugal. These countries turned to the International Monetary Fund (IMF) and other European governments for financial assistance in order to avoid defaulting on their loans. Japan’s credit rating was downgraded by Standard and Poor’s (S&P) in January 2011 over concerns about debt levels, and its rating was put on a negative outlook in April 2011. In August 2011, S&P downgraded long-term U.S. government debt from AAA (the highest possible rating) to AA+. To date, many advanced-economy governments have embarked on fiscal austerity programs (such as cutting spending or increasing taxes) to address historically high levels of debt. This policy response has been criticized by some economists as possibly undermining a weak recovery from the global financial crisis. Others argue that the austerity plans do not go far enough, and that more reforms are necessary to bring debt levels, especially with aging populations in many countries

Bank ownership, lending relationships and capital structure: Evidence from Spain

This paper analyses the influence of bank ownership and lending on capital structure for a sample of listed and unlisted Spanish firms in the period 2005–2012. The results suggest that bank ownership allows banks to obtain better information and reduce the agency costs of debt, as it has a positive relationship with the maturity of debt and a negative relationship with the cost of debt. These results are consistent with the predominance of the monitoring effect in bank ownership over the expropriation effect. The role of banks as shareholders and lenders also contributes to reduce agency cost of debt, as it reduces debt cost. JEL classification: G32, Keywords: Bank ownership, Bank lending, Debt, Debt maturity, Debt cos

The Debt Limit and the Constitution: How the Fourteenth Amendment Forbids Fiscal Obstructionism

The statutory debt limit restricts the funds that can be borrowed to meet the government\u27s financial obligations. On the other hand, the Fourteenth Amendment\u27s Public Debt Clause mandates that all the government\u27s financial obligations be met. This Note argues that the Public Debt Clause is violated when government actions create substantial doubt about the validity of the public debt, a standard that encompasses government actions that fall short of defaulting on or directly repudiating the public debt. The Note proposes a test to determine when substantial doubt is created. This substantial doubt test analyzes the political and economic environment at the time of the government\u27s actions and the subjective apprehension exhibited by debt holders. Applying this test, this Note concludes that Congress\u27s actions during the 1995–96 and 2011 debt-limit debates violated the Public Debt Clause, though Congress\u27s conduct during the debate over the debt limit in 2002 did not. And under a departmentalist understanding of executive power, a conclusion of this nature would be the basis for the president to ignore the debt limit when congressional actions create unconstitutional doubt about the validity of the public debt

The determinants of the accounting classification of convertible debt when managers have freedom of choice

This study examines the accounting classification of convertible debt in an environment where there is the choice of debt, other capital funds or equity. Contracting theory suggests possible determinants of accounting choice. These are leverage, as a proxy for closeness to debt covenants, the relative size of the convertible financial instrument issued and the contractual terms of the instrument. Two measures of leverage are used. One is debt to earnings before interest, tax, depreciation and amortisation (EBITDA). This variable has been included as it is the most commonly used ratio in debt covenants. The second measure is debt to net tangible assets as this ratio, or similar ratios, have been used in previous accounting studies to proxy for closeness to debt covenants. As leverage ratios tend to vary between industries I identify whether each firm is above or below their industry average. I find that the best predictor of the accounting classification choice is the contractual terms of the instrument. The two debt covenants derived hypotheses are not supported. The leverage of the issuer and the relative size of the issue have no significant influence on the choice of classification

Greek Debt: The Endgame Scenarios

Perhaps Greece -- a country with a debt to GDP already approaching 150 percent and set to move even higher -- avoids a debt restructuring. Perhaps not. What are the possible scenarios if Greece cannot return to the capital markets to refinance this gargantuan debt stock once its EU/IMF bailout package expires in two years time? What would a Greek debt restructuring look like after mid-2013? And (sharp intake of breath here) what would happen if such a debt restructuring were undertaken before that point

Debt relief as a platform for reform: the case of Nigeria's virtual poverty fund

In June 2005 the Paris Club group of creditors announced a US$30 billion debt relief package for the Nigerian government, which included a US$18 billion debt write off. This paper describes how these debt relief savings have been managed and spent, with a focus on the development and implementation of a comprehensive tracking system that aimed to effectively monitor debt relief expenditures. The paper argues that the Nigerian case implies debt relief can be a valuable tool for supporting public sector reform