A Pre-export Guarantee Facility in Moldova : Mitigating Political Risk in Transition
Moldovan firms wanting to export face severe financing constraints. The local banking system has neither the capital base nor the technical capacity to finance their working capital requirements. And export credit agencies either are not willing to provide cover, or, if they are, they require a full government counterguarantee covering both commercial and political risks. Thus, to enable viable local firms to attract private working capital, the government of Moldova asked the World Bank to help design a pre-export guarantee facility, with the proviso that the facility should not require the government to assume commercial risks. Under this facility, the Moldovan government guarantees financiers against political risk, and the World Bank provides a backstop guarantee of the government's claim payment obligations. A similar approach could be used in other transition economies, where firms face similar constraints. This Note describes the development of the facility and offers suggestions for designing a "line of guarantee" modeled on it as a way to help attract private finance for a relatively large number of small projects.
| Main Authors: | , |
|---|---|
| Language: | English |
| Published: |
World Bank, Washington, DC
1995-12
|
| Subjects: | GUARANTEE AGREEMENTS, EXPORT CREDIT INSURANCE, EXPORT FINANCE, EXPORT DEVELOPMENT, WORLD BANK, PRIVATE INVESTMENTS, COMMERICAL RISKS, TRANSITION ECONOMIES, POLITICAL RISKS, CONTINGENT LOAN FACILITY, PRE-EXPORT GUARANTEE FACILITY ASSURANCE, CAPITAL BASE, COVERAGE, ENABLING ENVIRONMENT, FINANCIAL SECTOR, FINANCIAL SECTOR DEVELOPMENT, FINANCING CONSTRAINTS, FOREIGN EXCHANGE, FOREIGN EXCHANGE REGIME, INTERNATIONAL BANKS, LIBERALIZATION, POLITICAL RISK, PRESIDENCY, TRADING, TRADING COMPANIES, WORKING CAPITAL, |
| Online Access: | http://documents.worldbank.org/curated/en/1995/12/696851/pre-export-guarantee-facility-moldova-mitigating-political-risk-transition https://hdl.handle.net/10986/11642 |
| Tags: |
Add Tag
No Tags, Be the first to tag this record!
|
| Summary: | Moldovan firms wanting to export face
severe financing constraints. The local banking system has
neither the capital base nor the technical capacity to
finance their working capital requirements. And export
credit agencies either are not willing to provide cover, or,
if they are, they require a full government counterguarantee
covering both commercial and political risks. Thus, to
enable viable local firms to attract private working
capital, the government of Moldova asked the World Bank to
help design a pre-export guarantee facility, with the
proviso that the facility should not require the government
to assume commercial risks. Under this facility, the
Moldovan government guarantees financiers against political
risk, and the World Bank provides a backstop guarantee of
the government's claim payment obligations. A similar
approach could be used in other transition economies, where
firms face similar constraints. This Note describes the
development of the facility and offers suggestions for
designing a "line of guarantee" modeled on it as a
way to help attract private finance for a relatively large
number of small projects. |
|---|