Nailing the flag to the mast—promises of super-priority in public debt

Abstract

Confronted with eroding market confidence in a country's debt obligations, what's a local politician to do? Major changes to fiscal policies are inevitably controversial back home. Securing financial support from multilateral official sector entities usually involves knuckling under to unpopular economic reforms. But there is one measure all politicians can take quickly and cheaply – cross their hearts, hope to die, and solemnly promise to treat debt service payments as the first, the highest and the most sacred priority in the use of public funds. The question is, what are such promises worth in practice? We argue not much.