TÀI CHÍNH QUỐC TẾ - CHƯƠNG 5 potx

CHAPTER V: BALANCE OF PAYMENTS DEFICIT AND ROLES OF LONDON – PARIS CLUB DEBT 1. Nature of Balance of Payment 2. Recent BOP Figure 3. Roles of IFIs in Debt Crisis 4. Roles of official development assistance 1. Nature of Balance of Payment 2. Recent BOP Figure 3. Roles of IFIs in Debt Crisis 4. Roles of official development assistance 12/21/2010 1 B02013 - BALANCE OF PAYMENTS DEFICIT AND ROLES OF LONDON – PARIS CLUB DEBT Preface • In 1970s, LDC’s debt significant increases Why? What? Who? How much? • In 1970s, LDC’s debt significant increases Why? What? Who? How much? 12/21/2010 2 B02013 - BALANCE OF PAYMENTS DEFICIT AND ROLES OF LONDON – PARIS CLUB DEBT 1. Nature of Balance of Payment • Define – BOP deficit is the emergence or increase payment of foreign account, including services fee incurred. • Nature – 1970-1989: BOP deficit of LDC Increase from 64,8 billion to 1,283 billion USD – Why? • Define – BOP deficit is the emergence or increase payment of foreign account, including services fee incurred. • Nature – 1970-1989: BOP deficit of LDC Increase from 64,8 billion to 1,283 billion USD – Why? 12/21/2010 3 B02013 - BALANCE OF PAYMENTS DEFICIT AND ROLES OF LONDON – PARIS CLUB DEBT 2. Recent BOP Figure • Pre 1970 • 1970 - 1989 12/21/2010 4 B02013 - BALANCE OF PAYMENTS DEFICIT AND ROLES OF LONDON – PARIS CLUB DEBT 3. Roles of IFIs in Debt Crisis 3.1 Root of Debt Crisis • Services are not provided at the end of schedule • Reconstructed debt still hasn’t meet deadline. • Debtor declares bankruptcy or unable to pay (*) 3.1 Root of Debt Crisis • Services are not provided at the end of schedule • Reconstructed debt still hasn’t meet deadline. • Debtor declares bankruptcy or unable to pay (*) 12/21/2010 5 B02013 - BALANCE OF PAYMENTS DEFICIT AND ROLES OF LONDON – PARIS CLUB DEBT 3. Roles of IFIs in Debt Crisis 3.1 Root of Debt Crisis (cont.) Let i= current interest rate, DS = Debt Service Repayment; P = Base capital plus Loan Interest; D = debt has to pay (1) NRT = Net Resource Transfer, L = net loan, hence (2) From (1) and (2) 3.1 Root of Debt Crisis (cont.) Let i= current interest rate, DS = Debt Service Repayment; P = Base capital plus Loan Interest; D = debt has to pay (1) NRT = Net Resource Transfer, L = net loan, hence (2) From (1) and (2) 12/21/2010 6 B02013 - BALANCE OF PAYMENTS DEFICIT AND ROLES OF LONDON – PARIS CLUB DEBT 3. Roles of IFIs in Debt Crisis • 3.1 Root of Debt Crisis (cont.) If C = cost of a country - The country will not bankrupt if - The country will likely declare bankrupt if We can reduce this risk by either  DS (Reconstruct Debt, reduce interest in D, )   C   L (re-enter the loan) • 3.1 Root of Debt Crisis (cont.) If C = cost of a country - The country will not bankrupt if - The country will likely declare bankrupt if We can reduce this risk by either  DS (Reconstruct Debt, reduce interest in D, )   C   L (re-enter the loan) 12/21/2010 7 B02013 - BALANCE OF PAYMENTS DEFICIT AND ROLES OF LONDON – PARIS CLUB DEBT 3. Roles of IFIs in Debt Crisis 3.2 Roles of International Financial Institutions - IFIs - WB (World Bank) - IMF (International Money Fund) - Paris & London Financial Club - They are the major player in debt reconstructing 3.2 Roles of International Financial Institutions - IFIs - WB (World Bank) - IMF (International Money Fund) - Paris & London Financial Club - They are the major player in debt reconstructing 12/21/2010 8 B02013 - BALANCE OF PAYMENTS DEFICIT AND ROLES OF LONDON – PARIS CLUB DEBT 3. Roles of IFIs in Debt Crisis 3.2.1 Roles of WB and IMF - There are 5 issues - Criteria for ratings - Benefits that HIPC brings 3.2.1 Roles of WB and IMF - There are 5 issues - Criteria for ratings - Benefits that HIPC brings 12/21/2010 9 B02013 - BALANCE OF PAYMENTS DEFICIT AND ROLES OF LONDON – PARIS CLUB DEBT 3. Roles of IFIs in Debt Crisis 3.2.2 Roles of London & Paris Club  The London club is a group of representative commercial banks  The Paris club is a group of representative lender, includes US and G7 - Unofficial rules and infrastructure - Special consideration (disaster…) 3.2.2 Roles of London & Paris Club  The London club is a group of representative commercial banks  The Paris club is a group of representative lender, includes US and G7 - Unofficial rules and infrastructure - Special consideration (disaster…) 12/21/2010 10 B02013 - BALANCE OF PAYMENTS DEFICIT AND ROLES OF LONDON – PARIS CLUB DEBT . IMF - There are 5 issues - Criteria for ratings - Benefits that HIPC brings 3.2.1 Roles of WB and IMF - There are 5 issues - Criteria for ratings - Benefits that HIPC brings 12/21/2010 9 B02013 -. Moody’s and S&P - Determine risk of debtors by analyzing financial information - Moody’s Short-term debt ratio - Moody’s Long-term debt ratio - Moody’s judgment in capital exchange - Financial Strength. information - Moody’s Short-term debt ratio - Moody’s Long-term debt ratio - Moody’s judgment in capital exchange - Financial Strength Rating of Banks - Moody’s favorite shares - Standard & Poor 12/21/2010