Subnational Debt, Insolvency, and Market Development

State and local debt and the debt of quasi-public agencies have grown in importance as a result of fiscal decentralization, rapid urbanization, and the increasing role played by private capital. However, with debt comes the risk of insolvency. This note outlines a set of aligned fiscal incentives that should be in place, as well as the design issues to be considered in debt restructuring frameworks. This note also suggests some broad lessons extracted from several country experiences with subnational debt restructuring, insolvency frameworks, and debt market development. This note suggest a range of possible lessons to consider when designing reforms to align fiscal incentives and develop a robust subnational debt framework that can be used to effectively manage the insolvency risks that will inevitably accompany the new dynamism of subnational finance.

Bibliographic Details

Main Authors:	Liu, Lili, Canuto, Otaviano
Language:	English en_US
Published:	World Bank, Washington, DC 2013-04
Subjects:	ACCOUNTING, ACCOUNTING STANDARDS, ADMINISTRATIVE CAPACITY, AGREEMENT ON DEBT RESOLUTION, ASSETS, BAILOUT, BAILOUTS, BALANCE DUE, BANK LOANS, BANKRUPT, BANKRUPTCY, BANKRUPTCY CODE, BANKS, BENEFICIARIES, BOND, BOND INSTRUMENTS, BONDS, BORROWER, BORROWING COST, BORROWING COSTS, BUDGET CONSTRAINT, CAPITAL INVESTMENTS, CAPITAL MARKET, CAPITAL MARKETS, CENTRAL BANK, CENTRAL GOVERNMENT, CITIES, COMMON POOL PROBLEMS, CONSTITUTIONAL CHANGE, CONTINGENT LIABILITIES, CONTRACTUAL RIGHTS, CONTRACTUAL RIGHTS OF CREDITORS, CORRUPTION, CREDIT MARKETS, CREDIT RATINGS, CREDIT RISKS, CREDIT SYSTEM, CREDITORS, CREDITS, CREDITWORTHY BORROWERS, CURRENCY, DEBT, DEBT CRISES, DEBT DEFAULT, DEBT FINANCE, DEBT FINANCING, DEBT INSTRUMENTS, DEBT ISSUANCE, DEBT MARKET, DEBT MARKET DEVELOPMENT, DEBT OBLIGATIONS, DEBT RESOLUTION, DEBT RESTRUCTURING, DEBT RESTRUCTURING MECHANISMS, DEBT SERVICE, DEBT SERVICE CAPACITY, DEBT STOCK, DEBT SUSTAINABILITY, DEBT SWAP, DEBTOR, DEBTORS, DEBTS, DEDICATED REVENUE, DEFAULT RATES, DEFAULT RISKS, DEFAULTS, DEPENDENT, DEVELOPING COUNTRIES, DEVELOPING COUNTRY, DISSENTING MINORITY CREDITORS, ECONOMIC GROWTH, ECONOMIC POLICY, EMERGING MARKETS, EXISTING DEBT, EXPENDITURE, FEDERAL BANKRUPTCY, FEDERALISM, FINANCES, FINANCIAL CRISIS, FINANCIAL MANAGEMENT, FINANCIAL MARKETS, FINANCIAL MISMANAGEMENT, FINANCIAL SYSTEM, FISCAL ADJUSTMENT, FISCAL AUTONOMY, FISCAL CAPACITY, FISCAL DECENTRALIZATION, FISCAL DEFICITS, FISCAL DISCIPLINE, FISCAL FRAMEWORK, FISCAL MANAGEMENT, FISCAL POLICIES, FISCAL POLICY, FISCAL REFORM, FISCAL SUSTAINABILITY, FISCAL TRANSFER, FISCAL TRANSFERS, FORECLOSURE, GOVERNMENT BOND, GOVERNMENT BOND MARKET, GOVERNMENT BORROWING, GOVERNMENT CREDIT, HARD BUDGET, INCOME LEVEL, INDIVIDUAL CREDITORS, INFRASTRUCTURE DEVELOPMENT, INFRASTRUCTURE FINANCING, INFRASTRUCTURE INVESTMENT, INFRASTRUCTURE INVESTMENTS, INSOLVENCY, INSOLVENCY FRAMEWORK, INSOLVENCY FRAMEWORKS, INSOLVENCY MECHANISM, INSOLVENCY MECHANISMS, INSOLVENCY PROCEDURES, INSOLVENCY RISKS, INSOLVENT, INSTITUTIONAL REFORMS, INSTRUMENT, INTERGOVERNMENTAL FISCAL RELATIONS, INTERNATIONAL MARKETS, INVESTMENT REQUIREMENTS, ISSUANCE, JUDGMENT, JUDICIAL PROCEDURES, JUDICIARY, JURISDICTIONS, LARGE DEBTS, LEGAL CONSTRAINTS, LEGAL FRAMEWORK, LEGAL FRAMEWORKS, LEGAL SYSTEM, LENDERS, LEVEL OF GOVERNMENT, LEVERAGE, LOAN, LOAN MATURITY, LOCAL DEBT, LOCAL GOVERNMENT, LOCAL GOVERNMENTS, LOCAL PUBLIC SERVICES, MACROECONOMIC ENVIRONMENT, MACROECONOMIC FRAMEWORK, MACROECONOMIC STABILITY, MACROECONOMIC STABILIZATION, MAJORITY OF CREDITORS, MANDATES, MARKET ACCESS, MARKET DEVELOPMENT, MISMANAGEMENT, MONETARY FUND, MORAL HAZARD, MUNICIPAL BANKRUPTCY, MUNICIPALITIES, MUNICIPALITY, NEGOTIATIONS, OPEN MARKET, PENSIONS, POLICY MAKERS, PRIVATE CAPITAL, PROVINCES, PROVINCIAL DEBT, PUBLIC AGENCIES, PUBLIC DEBT, PUBLIC FINANCE, REGULATORY FRAMEWORK, RESTRUCTURING PROCESS, RETURNS, REVENUE SHARING, REVENUE SOURCES, RIGHTS OF CREDITORS, RISK OF INSOLVENCY, ROLE OF COURTS, SAVINGS, SOVEREIGN DEBT, SOVEREIGN RISKS, STATE GOVERNMENT, SUBNATIONAL, SUBNATIONAL BOND MARKET, SUBNATIONAL DEBT, SUBNATIONAL ENTITIES, SUBNATIONAL FINANCE, SUBNATIONAL GOVERNMENTS, SUPPLY OF CREDIT, TAX, TAXATION, TRANSACTION, TRANSPARENCY, TYPES OF DEBT, USE OF DEBT, WAGES, WORKOUTS,
Online Access:	http://documents.worldbank.org/curated/en/2013/04/17530794/subnational-debt-insolvency-market-development https://hdl.handle.net/10986/17023
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