A Stability and Social Investment Facility for High Debt Countries

24 Pages Posted: 3 May 2007

See all articles by Kemal Dervis

Kemal Dervis

United Nations - Development Programme (UNDP)

Nancy Birdsall

Center for Global Development

Date Written: January 2006


This paper proposes the creation of a "Stability and Social Investment Facility" (SSF) to be housed either at the IMF or the World Bank. It would be a long-term facility to help high-debt emerging market countries cope with and ultimately overcome what will otherwise remain a chronic structural weakness. The SSF would be an instrument providing a steady and predictable source of long-term funds as well as a strong policy signal to help high-debt emerging-market economies reduce their debt burden without having to forego vital pro-poor social expenditures and growth programs.

For the facility to have a significant impact on debt and income dynamics in the eligible countries, the authors estimate it would need to lend $10-20 billion a year. The financial cost to the donor community would be the interest subsidy built into the SSF; were the subsidy 200 basis points, the cost in the first year would be $20 million for every $1 billion of lending.

The rationale for the subsidy element is its catalytic role in facilitating a strong commitment to both prudent macroeconomic policies and pro-poor growth policies. The lower interest cost of the SSF, even if modest, would make it financially and politically easier for governments in eligible countries to address their long-term social (MDG) objectives, while maintaining a sound fiscal stance.

Keywords: emerging market, high-debt, structural debt

JEL Classification: F0, O0

Suggested Citation

Dervis, Kemal and Birdsall, Nancy, A Stability and Social Investment Facility for High Debt Countries (January 2006). Center for Global Development Working Paper No. 77. Available at SSRN: https://ssrn.com/abstract=984048 or http://dx.doi.org/10.2139/ssrn.984048

Kemal Dervis (Contact Author)

United Nations - Development Programme (UNDP) ( email )

One United Nations Plaza
New York, NY 10017
United States

Nancy Birdsall

Center for Global Development ( email )

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Washington, DC 20036
United States
202-416-0700 (Phone)

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