LOCAL GOVERNMENT BORROWING - ppiaf

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Practical Lessons from Mexico and US • Financial crisis at this point limited to debt issued in US and Europe. Still net upgrading of credits in Latin America, Asia. • Risk aversion and credit constraints are likely to lead to less cross-border private market lending, guarantees in sub-national sector • Uncertain accuracy of credit ratings in new instruments or new sectors, until have track record of performance • Market will scrutinize more thoroughly ratings of sub-national governments in developing world. • To help open market, credit ratings should be comparable across classes of debt. • Pension funds, other buyers need to know sub-national risk relative to other debt, not just relative to other local governments.
Specialized Finance Institutions • SFIs like Municipal Development Funds are, and will remain for some time, the largest domestic lenders to sub-national governments. • Can be purely private intermediaries, like INCA, parastatals, , or government agencies. Most belong to public sector. • Primary policy challenge: to make lending by public sector SFIs consistent with long-term growth of private credit market.
Page 1 and 2: LOCAL GOVERNMENT BORROWING George E
Page 3 and 4: Local Capital Budget • Sources of
Page 5 and 6: Why Establish Private Credit Market
Page 7 and 8: Market Credit: Successes But Not on
Page 9 and 10: • Mexico’s System Reform: Mexic
Page 11: US Financial Crisis • Mexico in R
Page 15: Final Messages • Private sector p

LOCAL GOVERNMENT BORROWING - ppiaf

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