A Note on Burden Sharing Among Creditors
28 Pages Posted: 15 Feb 2006
Date Written: March 1992
This paper presents a framework for evaluating the relative contributions of different creditors in cases where only partial payments can be made by the debtor country. A methodology is developed to calculate partial paymentsor alternatively putdetermine residual financing. By focusing on the relative seniority of creditors and expectations of the debtor`s ability to repay alternative sharing rules are quantified. The measure is based on the expected present value of payments. Creditors earning a below-market rate of return suffer a burden; creditors earning the same rate of return are said to share the burden equally.
JEL Classification: F34
Suggested Citation: Suggested Citation