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The Potential Role for Securitizing Public Sector Revenue Flows: An Application to the Phillipines

Author/Editor: Chalk, Nigel Andrew
Authorized for Distribution: June 1, 2002
Electronic Access: Free Full Text (PDF file size is 1,193KB)
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.

Summary: Since the mid-1980s, the securitization of future flow receivables has grown in importance as a financing alternative for the public sector. In a world of perfect capital markets, there appears to be little rationale-in terms of reducing the average cost of public sector financing-to resort to secured borrowing. However, for many developing countries, financial markets are far from perfect. In particular, there may be an important role for secured financing where increased uncertainty or financial market volatility leads to credit rationing driven by information asymmetries. Secured financing, however, does not provide a free lunch. Such arrangements subordinate existing and future creditors and, as a result, may raise the cost of future borrowing. In addition, high transaction costs, the thin market in secured instruments, the risk of legal challenges, and reduced budget and debt management flexibility may offset the cost advantage of public sector securitization.
 
Series: Working Paper No. 02/106
Subject(s): Fiscal policy | Philippines | Public sector | Bonds | International capital markets
Author's keyword(s): Fiscal Policy | international finance | securitization
 
English  
    Published:   June 1, 2002        
    ISBN/ISSN:   1934-7073   Format:   Paper
    Stock No:   WPIEA1062002   Pages:   30
    Price:   US$15.00
       
     
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