Elsevier

World Development

Volume 19, Issue 8, August 1991, Pages 1117-1120
World Development

Deserved debt relief: a note

https://doi.org/10.1016/0305-750X(91)90129-6Get rights and content

Abstract

Deserved debt relief on outstanding debt is estimated on the basis of that part of earnings which is due to a higher rate of return than the cost of funds. Using data for net tranfers between commercial banks and the highly indebted countries of Latin America, estimates of deserved debt relief provide interesting information about the probability of long-term loans. It turns out that the commercial banks as a whole have not had any substantial losses on their loans to Latin America during 1970–87. Furthermore, the variation of deserved debt relief across countries is very large. It is suggested that the countries in question should be granted, as a minimum, debt relief according to estimates of reserved debt relief.

References (7)

  • Ridiger Dornbusch

    Our LDC debts

  • Stanley Fischer

    Sharing the burden of the international debt crisis

  • Paul Krugman

    Financing vs. forgiving a debt overhang

There are more references available in the full text version of this article.

Cited by (1)

This note was written during a visit at the Department of Economics, Duke University. I acknowledge that the final outcome has benefited from the comments of an anonymous referee.

View full text