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Sovereign state-contingent instruments (SCDIs) have been suggested as complements or alternatives to traditional sovereign debt instruments for a long time, but with little uptake. Markets for SCDIs have suffered from low liquidity and issues around measurement. This article argues that the escalating climate and ecological crises provide a strong rationale to reconsider the use of sovereign SCDIs as the physical and transition impacts of climate change and environmental degradation are increasingly altering the risk profile of sovereigns. The use of risk-linked sovereign instruments such as cat bonds or resilience bonds and embedding disaster risk clauses in sovereign debt contracts would be an important way for governments, especially in highly climate-vulnerable countries, to mitigate climate risks and scale up investment in resilience. Moreover, instruments such as sustainability-linked bonds that incentivise sustainability-oriented policies and investments could help to bring about better sustainability outcomes and contribute to greater debt sustainability. SCDIs can also play an important role in facilitating debt restructurings. The international community, supported by key institutions like the IMF and the major multilateral development banks, should make a concerted effort to promote the widespread adoption of sovereign SCDIs to support better public debt management, the climate-proofing of public finances, and the achievement of more ambitious sustainability outcomes.

State-contingent government debt has been proposed as a way to reduce costly debt crisis. However, markets for this type of debt remain very limited, for reasons that are not yet fully understood. This paper describes a new database covering state-contingent government debt issued between 1863 and 2020. Based on these data, this paper shows stylized facts regarding the main design features, and market performance, of state-contingent government debt. It also provides a brief history of state-contingent government borrowing, which is contextualized with a simple theoretical model of state-contingent debt. The results show that there have been several small, heterogeneous, issuances of state-contingent debt, which resemble pilot runs in this new asset class. The paper concludes with some common challenges associated to state-contingent government debt.

Especially in resource rich countries with weak institutions of governance, the interests of governments often diverge from those of their citizens and creditors. Sovereign bond contracts can potentially help align these interests, to the benefit of all parties, by indexing payment obligations to improvements in the health and education of the issuer’s citizenry. To that end, this Article proposes a Human Development Bond (HDB) with a variable coupon schedule that both insures issuers against recessions and incentivizes them to encourage investment in human capital when economic growth is strong. The potential benefits of such an instrument can only be realized, however, with significant support from the international community. Moreover, further empirical research is needed to calibrate the HDB’s coupon schedule to provide well-timed and appropriately sized debt relief.

This paper provides a tractable framework to assess how the structure of debt instruments – specifically by currency denomination and indexation to GDP – can raise the debt limit of a sovereign. By calibrating the model to different country fundamentals, it is clear that there is no 'one-size-fits-all' approach to optimal instrument design. For instance, low income countries may find benefit in issuing local currency debt; while in advanced economies, debt tolerance can be substantially enhanced through issuing GDP-linked bonds. By looking at the marginal impact of these instruments, the paper also provides insight into the optimal portfolio composition.

Developing countries need additional, cross-border capital channeled into their private sectors to generate employment and growth, reduce poverty, and meet the other Millennium Development Goals. Innovative financing mechanisms are necessary to make this happen. 'Innovative Financing for Development' is the first book on this subject that uses a market-based approach. It compiles pioneering methods of raising development finance including securitization of future flow receivables, diaspora bonds, and GDP-indexed bonds. It also highlights the role of shadow sovereign ratings in facilitating access to international capital markets. It argues that poor countries, especially those in Sub-Saharan Africa, can potentially raise tens of billions of dollars annually through these instruments. The chapters in the book focus on the structures of the various innovative financing mechanisms, their track records and potential for tapping international capital markets, the constraints limiting their use, and policy measures that governments and international institutions can implement to alleviate these constraints.

This study aims to help governments design sustainable Public-Private Partnership (PPP) strategies and projects in the context of the changed circumstances brought on by the global financial and economic crisis that began in the fall of 2008. The study analyses the impact and implication of the crisis on PPP infrastructure projects across the Europe and Central Asia (ECA) region. In the research undertaken for this study, it appears that most crisis-specific issues are cross-sectoral, therefore requiring cross-sectoral responses. The intended audience for this report includes national government stakeholders involved in infrastructure financing, including Ministries in charge of infrastructure, especially transport, energy, and water; state-owned enterprises with operational responsibilities, such as road directorates; and Ministries of Finance and development banks involved in PPP. This report reviewed the region's experience in PPPs in infrastructure before and during the financial crisis period (from late 2006 to 2010). Since not all ECA countries have had successful or ongoing PPP projects during this time, the report draws on lessons from Brazil, India, Spain, and the United Kingdom, countries with established PPP project pipelines to draw on cross-sectoral lessons. The findings can be used by countries wishing to start or re-start their PPP program following the impact of the recent crisis. However, beyond the crisis and its effects, the report can also guide future development of sustainable and crisis-resilient PPP programs. Most of the analysis supporting the report recommendations was undertaken for the highway sector and was financed through from a grant from the transport research support program. Initially, the highway sector was the focus of this study but the scope was later widened to include all infrastructure sectors because most issues facing highway PPP projects are common to other sectors requiring a cross-sectoral approach to PPP. Sector-specific strategies for highways have been documented in a recent World Bank study.

This book is intended to explain the factors underlying the stellar growth record that has led to Armenia's emergence as the Caucasian Tiger and to provide policy advice to the Armenian authorities to ensure the continuation of this growth. The book is presented in two parts, with Part I containing analysis and policy advice and Part II containing detailed background papers.

Conventional fiscal analysis fails to address contingent fiscal risk. The government budget process and documentation generally fail to scrutinize the substantial claims on public resources that are associated with government contingent liabilities, realized and potential. This report fills gaps on our understanding of fiscal risks and develops suitable frameworks for managing them. It offers new analytical concepts, presents country case studies, and based on country case studies, provides a menu of practical ideas for policymakers and scholars to bring fiscal risk within the ambit of public finance. The book is divided into two parts: Part I of this book gives an overview of different approaches to dealing with government fiscal risks. The country examples in this part offer additional conceptual approaches and illustrate some of the discussion in the earlier chapters. Part II presents analytical and institutional approaches that governments might consider when facing risks in specific government programs or sectors. The book indicates that countries differ greatly in their treatment of contingent liabilities and other fiscal risks. In this respect, the book illustrates that contemporary practices have yet to be standardized.

Since 1980, China's economy has been the envy of the world. Is annual growth rate of more than 9 percent during this period makes China today the world's fourth-largest economy. And this sustained growth has reduced the poverty rate from 60 percent of the population to less than 10 percent. However, such rapid growth has also increased inequalities in income and access to basic services and stressed natural resources. The government seeks to resolve these and other issues by creating a 'harmonious society' -- shifting priorities from the overriding pursuit of growth to more balanced economic and social development. This volume compiles analyses and insights from high-level Chinese policy makers and prominent international scholars that address the changes needed in public finance for success in the government's new endeavor. It examines such key policy issues as public finance and the changing role of the state; fiscal reform and revenue and expenditure assignments; intergovernmental relations and fiscal transfers; and financing and delivery of basic public goods such as compulsory education, innovation, public health, and social protection. And it offers concrete recommendations for immediate policy changes and for China's future reform agenda. 'Public Finance in China' is a must-read for specialists in public finance and for those seeking an understanding of the complex and daunting challenges China is facing.

This paper summarizes the experiences to date of the new EU countries (the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia, and Slovenia—the EU8) in the reform of higher education systems in a period of growing demand; changing patterns of access; rapid expansion and increased participation rates; and an apparent dilution of average quality. The study discusses the growing experience with a variety of financing mechanisms in EU8 countries, drawing on detailed country case studies, and seeks to develop some useful lessons from experience, mindful that each country will continue to develop its own solution based on national priorities.