In this guest post Peter Doyle, a former senior IMF economist, argues for the sovereign insolvency regime to be brought in line with that for banks, starting with Venezuela.
Motivation
The prior instalment of this sovereign insolvency blog trilogy concluded that “output foregone” is huge in highly-indebted IMF programme countries with high growth potential.
That is because in such cases, IMF programme design prioritises debt recovery ahead of activity. It imposes exorbitant primary surplus targets, wrecking the balance between primary spending and low taxes that is necessary to realise high productive potential.
Jamaica is a case in point. After a decade of compliance with IMF conditionality, including primary surpluses of 7-9 per cent of …
Read the full article at: https://ftalphaville.ft.com/2019/03/14/1552543200000/A-preemptive-sovereign-insolvency-regime/