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

June 1, 2002

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Format: Chicago

Nigel A Chalk. The Potential Role for Securitizing Public Sector Revenue Flows: An Application to the Philippines, (USA: International Monetary Fund, 2002) accessed November 8, 2024

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.

Subject: Credit ratings, Debt service, Economic sectors, External debt, Financial services, Legal support in revenue administration, Money, Public sector, Revenue administration, Securitization

Keywords: Coverage ratio, Credit rating, Credit ratings, Credit rationing, Debt covenant, Debt issue, Debt service, Financing cost, Financing need, Fiscal policy, Flow receivables, Future receivables, International finance, Legal support in revenue administration, North America, Public sector, Receivables generation, Receivables generation risk, Reserve account, Revenue flow, Securitization, Securitization arrangement, Securitized financing, Ticket receivables, WP

Publication Details

Pages:

30
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2002/106
Stock No:

WPIEA1062002
ISBN:

9781451852905
ISSN:

1018-5941

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