The Players and the Game of Sovereign Debt

Abstract

Is there “justice” in treating developing country debt crises? As a first step toward analyzing ethical questions in sovereign debt, this paper characterizes the actors, their main interests, and how they operate during the build up of government foreign debt and after a default on payments. These actors are the borrowing governments, domestic and foreign commercial banks, purchasers of government bonds, other governments lending to the debtor, and multilateral institutions (International Monetary Fund and development banks). As there is no international sovereign analog to court-supervised bankruptcy, the workout from crisis is found ad hoc, without rules or an enforcement mechanism.