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A note on LDC debt : considerations for institutional coordination (anglais)

This paper analyzes the two issues of quadrilateral compact and policy-based lending within the framework developed in two CPD working papers. Its primary purpose is to explore what the role of the Bank could be in mitigating some of the adverse economic effects of external borrowing by LDCs. Within the context of development policy loans (DPLs), the Bank's role is considered independent of a country's other creditors. As part of a consortium of borrowing and its external lenders, the contribution of the Bank is more complex. There are spillover effects from its status as senior lender to countries, in that: (1) policy-based loans with regulated disbursements affect the status of all loans, especially those of commercial lenders; and (2) the objectives of the Bank, the Fund and commercial banks may diverge from those of the country at exactly those times when concordance would yield the best result for all parties. This paper elaborates on these issues and in particular points out conditions under which the incentives of the parties to the compact are most likely to diverse. It also examines mechanism which may be used to increase the likelihood that incentives of all parties to the compact will be compatible and time consistent.

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