Until Debt Do Us Part Subnational Debt, Insolvency, and Markets

Reforms in subnational borrowing frameworks and debt restructuring mechanisms have gathered momentum in developing countries since the late 1990s. The objectives of reforms are broadly similar-strengthening fiscal management and preventing future insolvency. Often, these proceed in tandem with broader public finance reforms, macroeconomic stabilization, and the development of a robust medium-term fiscal framework and transparency. The reform paths and sequences that these countries chose reflect their own historical context, legal framework, and reform dynamics.Until Debt Do Us Part surveys the reform experience of a range of countries in strengthening subnational fiscal discipline and developing a framework for the resolution of subnational debt stress. Part I of the volume reviews the experience of subnational debt restructuring in Brazil, China, India, and Mexico. Part II presents the experience of developing subnational insolvency systems in Colombia, France, Hungary, and the United States. Part III focuses on the experience of China, the Philippines, Russia, South Africa, and the United States in subnational credit market development. The experiences discussed in this volume show the importance of moving to rules-based systems in which the higher-level government treats all lower-level governments according to the same rules. No matter what the rules, their ad-hoc or discretionary application is likely to be plagued with moral hazard and common-pool problems.