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Is Domestic Debt the Answer to Debt Crises?

Initiative for Policy Dialogue
  • Economics


Analysis of public debt in developing countries has traditionally focused on external debt. However, in recent years several countries have looked increasingly to domestic sources when expanding their net borrowing or adopted aggressive policies aimed at retiring public external debt and substituting it with domestically issued debt. Some countries are even building up domestic fiscal liabilities with the objective of sterilizing enlarged aid inflows. This chapter asks what possible challenges and opportunities might be arising from these new developments in sovereign debt management.

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