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We quantify the total stock of balances eligible for the 2022 federal student loan forgiveness policy and explore which groups benefit most. Roughly $441 billion in balances are eligible for forgiveness, which would leave almost 40 percent of federal borrowers with no remaining balance. The borrowers who benefit most, as measured by the ratio of forgiven balances to balances held, are younger, have lower credit scores, and live in lower-income neighborhoods. Compared to other salient fiscal policies, the forgiveness policy distributes less benefit to lower income ZIP codes than the Earned Income Tax Credit, but more benefit to lower income ZIP codes than the 2019 Child Tax Credit and the 2019 education tax credits for higher education. Lastly, we note a recent uptick in credit card and auto loan delinquency for student loan borrowers that may portend more widespread payment difficulties for borrowers if payments resume without relief.

The Kyrgyz Republic has experienced modest and volatile economic expansion since the economy bottomed out from the transition recession in 1995, when GDP amounted to about half of its pre-independence levels. As a result of structural reforms at the start of transition, the emergence of remittances and commodity exports, largely gold, as powerful new drivers of growth, and improvements in the macroeconomic management in the recent decade, per-capita real GDP grew by 3.1 percent a year on average since 1995. The Kyrgyz Republic is now a lower middle-income economy, as it was in 1990. Economic expansion has benefitted from fixed investment that has risen to 31 percent of GDP, one of the highest in Europe and Central Asia and well-above the threshold of 25 percent reached by the group of successful countries studied by the Growth Commission in 2007. Lower fiscal deficits and low inflation indicate the success of recent macroeconomic policies. These achievements notwithstanding, Kyrgyz Republic’s growth and productivity performance has lagged most relevant comparators, frustrating the needs of the poor and the young. As a result, while per-capita GDP in constant prices has doubled since 1995, it has still not caught up with pre-independence levels. Per-capita incomes in the Kyrgyz Republic have increased by 20 percent less than the average of lower middle-income countries since 2000 and 40 percent less than the average for the Caucasus and Central Asia. Productivity increases – proxied by changes in total factor productivity, have averaged half a percent since 2000, leaving largely factor accumulation as the driver of economic growth. And while ‘Productivity isn’t everything, but in the long run it is almost everything’, highlighting one of the main challenges of the country’s current growth model.3 Poverty has declined, but modest growth has made a modest dent, leaving the poverty rate as high as 31 percent, with a substantial part of the population living in regions with more limited and lower quality government services than in Bishkek.

This paper has shown that soft budget constraints are more likely to arise when a firm's bargaining power is larger and when the liquidation value of its project is smaller. An increase in the firm's bargaining power and a decrease in the liquidation value of its project augment the debt forgiveness to the firm, which reduces the firm's incentive to exert effort to circumvent financial distress, thereby bringing about soft budget constraints. This paper suggests that the bubble burst may be a contributing factor to soft budget constraints in Japan and that an injection of public capital into banks that suffered from large nonperforming loans can help to harden the budget constraints of borrowing firms.

The Indonesian bankruptcy law system adheres to the debt collective principle which is general seizure (sita umum) of the debtor’s property as guarantee for the payment of debt through the bankruptcy institution. The principle of debt collective stresses that the debtor’s debt shall be paid immediately from the property owned by the debtor. Based on such principle, bankruptcy serves as a means of coercion to materialize the creditors’ rights through liquidation of the debtor’s assets. Bankruptcy law in Indonesia does not recognize the principle of debt forgiveness, among others, the implementation of debt relief granted to the debtor to pay off debts that are truly incapable of being fulfilled. According to the Bankruptcy Law, after the completion of the bankruptcy process, the debtor is no longer in a state of bankruptcy, because the end of bankruptcy has revoked the status of insolvent debtors, hence debtors are considered as being competent to take care of their property. However, the termination of bankruptcy does not necessarily absolve the debtor from the remainder of the debt; creditors are entitled to collect it and debtors are obligated to pay it off. Upon the completion of the bankruptcy process, debtors or their heirs may apply for rehabilitation. However, rehabilitation is only to be granted if all creditors state that they have obtained payment in a satisfactory manner, meaning that recognized creditors will not file claims against the debtor concerned again even though they may not have received payment on all of their outstanding receivables. Request for rehabilitation can only be granted if the debtor has completed the entire scheme of bankruptcy and creditors were satisfied with the payment.

A firm has liabilities towards a group of creditors. We analyze the question of how to distribute the asset value of the firm among the creditors and the firm itself. Compared to standard bankruptcy games as studied in the game theory literature, we introduce the firm as an explicit player and define a new class of transferable utility games called liability games. Liability games are superadditive, constant sum, partially convex, and partially concave. The core of a liability game is empty if and only if the firm is insolvent and has multiple positive liabilities. We analyze the nucleolus of the game and show that allocating the asset value of the firm using the nucleolus satisfies efficiency, non-negativity, and liabilities boundedness. We prove that at the nucleolus, the firm gets a strictly higher amount than its stand-alone value if and only if the firm is insolvent and has multiple positive liabilities. The firm is using the threat to pay others to get debt forgiveness and is able to keep a positive amount of its assets. We provide conditions under which the nucleolus coincides with a generalized truncated proportional rule, assigning a non-negative payment to the firm and distributing the remainder in proportion to the liabilities, truncated by the asset value of the firm.

A firm has liabilities towards a group of creditors. We analyze the question of how to distribute the asset value of the firm among the creditors and the firm itself. Compared to standard bankruptcy games as studied in the game theory literature, we introduce the firm as an explicit player and define a new class of transferable utility games called liability games. Liability games are superadditive, constant sum, partially convex, and partially concave. The core of a liability game is empty if and only if the firm is insolvent and has multiple positive liabilities. We analyze the nucleolus of the game and show that allocating the asset value of the firm using the nucleolus satisfies efficiency, non-negativity, and liabilities boundedness. We prove that at the nucleolus, the firm gets a strictly higher amount than its stand-alone value if and only if the firm is insolvent and has multiple positive liabilities. The firm is using the threat to pay others to get debt forgiveness and is able to keep a positive amount of its assets. We provide conditions under which the nucleolus coincides with a generalized truncated proportional rule, assigning a non-negative payment to the firm and distributing the remainder in proportion to the liabilities, truncated by the asset value of the firm.

A firm has liabilities towards a group of creditors. We analyze the question of how to distribute the asset value of the firm among the creditors and the firm itself. Compared to standard bankruptcy games as studied in the game theory literature, we introduce the firm as an explicit player and define a new class of transferable utility games called liability games. Liability games are superadditive, constant sum, partially convex, and partially concave. The core of a liability game is empty if and only if the firm is insolvent and has multiple positive liabilities. We analyze the nucleolus of the game and show that allocating the asset value of the firm using the nucleolus satisfies efficiency, non-negativity, and liabilities boundedness. We prove that at the nucleolus, the firm gets a strictly higher amount than its stand-alone value if and only if the firm is insolvent and has multiple positive liabilities. The firm is using the threat to pay others to get debt forgiveness and is able to keep a positive amount of its assets. We provide conditions under which the nucleolus coincides with a generalized truncated proportional rule, assigning a non-negative payment to the firm and distributing the remainder in proportion to the liabilities, truncated by the asset value of the firm.

The papers in this series aim to provide a vehicle for publishing preliminary results on Macroeconomics and Fiscal Management (MFM) topics to encourage discussion and debate. This paper explores two new financing mechanisms that multilateral and bilateral development agencies could consider deploying to address problems of debt sustainability in small states. In this paper the authors provide an initial assessment of these proposals, informed by analysis of small state indebtedness and recent debt dynamics. Proposed financing instruments are predicated on assumptions that small states face high levels of indebtedness, and that reducing debt levels while increasing climate resilience could sustainably reduce such vulnerabilities. The authors find that levels of indebtedness vary widely across small states. Analysis of small state debt dynamics shows that small state debt accumulation has been driven by large primary and current account deficits and slow economic growth. Debt reduction from new mechanisms can only be expected to be sustainable, therefore, if countries simultaneously address the macroeconomic imbalances driving debt accumulation. The authors demonstrate that, while exposure to natural disasters is likely to have exacerbated economic management challenges in some small states, such exposures are unlikely to be the only important cause of indebtedness. The authors conclude that proposed new financing instruments can potentially help reduce small state debt burdens and gain fiscal space for climate adaptation but will not present a sustainable solution to problems of small state debt risks unless they involve macroeconomic and structural reforms to address the underlying imbalances driving rapid debt accumulation.

MCom (South African and International Tax), North-West University, Potchefstroom Campus, 2017 Prior to 1 January 2013, the provisions of the Income Tax Act 58 of 1962 (hereinafter referred to as the Act), which dealt with the consequences of a waiver of a debt for less than full consideration, were predominantly section 8(4)(m) and paragraph 12(5) of the Eighth Schedule to the Act (hereinafter referred to as the previous debt reduction rules). The previous debt reduction rules were replaced by section 19 and paragraph 12A of the Eighth Schedule to the Act, which came into operation 1 January 2013 (hereinafter referred to as the new debt reduction rules). The new debt reduction rules were introduced in an attempt to provide additional relief to financially distressed debtors, where a debt was reduced for less than full consideration. This focus of this research study was to establish whether the design of the new debt reduction rules conceptually facilitate the recovery of financially distressed debtors, where a debt waiver has occurred. This involved a critical analysis of the previous debt reduction rules and the new debt reduction rules to identify the additional relief measures that were introduced, if any. In addition, the new debt reduction rules were compared to the tax rules that apply to a debt waiver in Canada and the United Kingdom. A literature review was performed to analyse and compare the various pieces of legislation in the Act and the Companies Act (71 of 2008), as well as foreign legislation and literature available in respect of similar legislation in Canada and the United Kingdom. The objective of the literature review was to establish whether the new debt reduction rules provide additional relief, compared to the previous debt reduction rules, to companies in financial distress and whether the relief provided in new debt reduction rules provide adequate relief to financially distressed debtors, compared to countries such as Canada and the United Kingdom. The research study revealed that the introduction of the new debt reduction rules did not come with any significant amendments to the relief given to financially distressed debtors in the case of a debt waiver. The research also revealed that the relief provisions that are contained in the new debt reduction rules do not compare favourably to the relief that is given in the case of a debt waiver of a financially distressed debtor in Canada and the United Kingdom. The research study was concluded with suggestions for improvements to the Act, which will provide relief to financially distressed debtors where the new debt reduction rules are currently lacking. Masters

Sub-Saharan African countries as a group showed a considerable reduction in public and external indebtedness in the early 2000s as a result of debt relief programs, higher economic growth, and improved fiscal management for some countries. More recently, however, vulnerabilities in some countries are on the rise, including a few with very rapid debt accumulation. This paper looks at the heterogeneous experiences across Sub-Saharan African countries and the detailed dynamics that have driven changes in public debt since the global financial crisis. Borrowing to support fiscal deficits since 2009, including through domestic markets and Eurobond issuance, has driven a net increase in public debt for all countries except oil exporters benefitting from buoyant commodity prices and fragile states receiving post-2008 Highly Indebted Poor Country relief. Current account deficits and foreign direct investment inflows drove the external debt dynamics, with balance of payments problems associated with very rapid external debt accumulation in some cases. Pockets of increasing vulnerabilities of debt financing profiles and sensitivity of debt burden indicators to macro-fiscal shocks require close monitoring. Specific risks that policy makers in Sub-Saharan Africa need to pay attention to going forward include the recent fall in commodity prices, especially oil, the slowdown in China and the sluggish recovery in Europe, dependence on non-debt-creating flows, and accounting for contingent liabilities.