An SPV for Countries Lacking Normal Market Access

Abstract

Many emerging market countries are facing urgent liquidity needs in light of economic and financial shocks resulting from the COVID-19 pandemic. Official resources by themselves have been insufficient to meet needs and should be complemented by private resources at reasonable cost. To overcome credit concerns that restrict availability of private capital and are reflected in costly, and for many sovereign borrowers, unaffordable market pricing, it would be useful to establish a vehicle that can mobilize large amounts of financial resources from the international capital markets and provide cash flow relief on favorable terms and on relatively short notice to countries lacking normal market access. An SPV sponsored by a credible official sector institution, funded by private creditors and backed by credit enhancement from official and bilateral creditors serve an important need.

JEL Classification: F34, G15