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VI An Analysis of Kuwait’s Debt Collection Program

Author(s):
John Wilson, Susan Fennell, Nigel Chalk, Mohamed El-Erian, and Alexei Kireyev
Published Date:
April 1997
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Author(s)
Alexei P. Kireyev

Kuwait’s financial sector has been subject to two major payment shocks in recent years: the collapse of the unofficial stock exchange, the Souk Al-Manakh in 1982, which resulted in bankruptcies on a wide scale; and the Iraqi invasion, which destroyed physical assets and rendered many of the loans held by the Kuwaiti financial sector prior to the invasion uncollectible. The associated nonpayment history has increased the risk of moral hazard, thereby undermining the soundness of the Kuwaiti financial system.

The Kuwaiti government has taken steps, most recently through the Debt Collection Program (DCP)1 to deal with the payment problem and restore the integrity of the financial system. The continued successful implementation of the DCP will be a critical determinant of Kuwait’s ability not only to resolve the problems of bad loans and fully restore payments discipline in the financial sector, but even more important, to improve financial intermediation. As a result, the Kuwaiti financial system would return to a strong position needed to support the effectiveness of reforms aimed at enhancing the role of the private sector in production, investment, and employment generation.

This section reviews the key aspects of and basic principles underlying the DCP. It discusses the history of the DCP, presents an analytic framework for assessing the DCP, and offers some observations on recent trends and policies. Concluding remarks are contained in the final section.

A Brief History of the DCP

The Souk Al-Manakh Episode

The principal threat to the stability of the Kuwaiti financial system during the 1980s came from the collapse of the Souk Al-Manakh. This informal curb market got under way in 1977-78, trading largely in shares of companies outside Kuwait.2 By the early 1980s speculative activity reached frenzied levels involving trading in shell and dummy companies, large “payments” with postdated checks and—the main source of later trouble for financial institutions—substantial loans from banks and investment companies to individual traders. When the bubble burst in 1982, many traders were left with massive debts to the financial sector.3 Most of the Kuwaiti banks and some of the investment companies were then left with a portfolio of difficult debts and greatly reduced cash flow from servicing of these nominal assets.

The “bailout” efforts of the government and central bank during the 1980s focused on minimizing the damage and ensuring the viability of existing institutions. The support efforts commenced early after the Souk Al-Manakh’s collapse, beginning with the Fund for Security of Forward Transactions, which was established in late 1982. Capitalized at KD 500 million, the purpose of this fund was to settle amounts up to a maximum of KD 2 million in return for the transfer of all claims to this fund. Up to the first KD 100,000 accounts could be settled in cash; remaining amounts were in government bonds running out to six years maturity. It was estimated that more than KD 500 million in bonds was issued in the initial phase.

In April 1983, the authorities established the Forward Shares Transactions Settlement Corporation, in an effort to collect from the debtors. This entity was empowered to evaluate the assets of individuals involved in the collapse and to administer, resolve, and execute settlements and to act on behalf of creditors with claims resulting from forward share trading. At the same time, efforts were made to stabilize the stock market by imposing daily limits on stock price movements and to standardize brokerage commissions. Stock market trading was limited to four brokerage houses, each of which posted a bond of KD 100,000 and were prohibited from trading on their own account; activity was confined to the exchange floor and official hours.

The government provided additional direct support to equity markets by spending large sums (about KD 700 million) between November 1982 and April 1984 on direct share purchases in companies whose market values were threatened, either by market declines or, in some cases, by their own financial collapse from having participated in the Souk Al-Manakh. Some KD 400 million of these purchases were in shares of banks and insurance companies alone. The acquisitions made during this period form the core of shareholdings by the Kuwait Investment Authority (KIA) that, in the mid-1990s, have been partially resold as an early part of the authorities’ divestiture plans.

Original Program

The original debt collection program—Difficult Credit Facilities Settlement Program (DCFSP)—was set up in August 1986 to assist in normalizing nonperforming debts arising from the collapse of the Souk Al-Manakh (Table 6.1). Its objective was to restore the asset side of the commercial banks’ balance sheets by rescheduling their nonperforming loans. Under the program, debtors holding collateralized debt were to reach agreement with banks to pledge their available assets producing cash inflow in return to rescheduling up to 10-15 years at 0-7 percent interest. Debtors with noncollateralized debt pledged their assets that did not produce cash inflow in return, and their debts were rescheduled interest free, up to ten years. This latter debt was guaranteed by the government, together with bank stockholders’ equity. Banks unable to make actual profits in order to provision against these debts were supported by deposits from the government at subsidized interest rates to the extent necessary to show operational profits.

Table 6.1.Chronology of the Debt Collection Program, 1986-96
Effective DateLegal ActionProvisionsEffects
August 10, 1986Approved by the Council of MinistersCollateralized individual debt: debtors pledged their assets producing cash inflow in return for rescheduling up to 10–15 years and 0–7 percent interestNoncollateralized individual debt: debtors pledged their assets not producing cash inflow in return for rescheduling interest-free up to 10 yearsPrevented banking and the financial market failure
May II, 1992Law No. 32Phase 1. Purchase of bad debts from KuwaitisThe government assumed the burden of bad debts, private sector indebtedness replaced by a large public sector debt obligation
The government with the central bank acting as its agent purchased all difficult debts against the issue of government bonds
September 7, 1993Law No. 41Phase 2. Recovery of bad debtsThe law established clear procedures and the timetable for repayments under both options
Repayment option 1: repayment during two years by September 7, 1995 of 25–46 percent of face valueRepayment option 2: repayment during 12 years with 8 percent discount for an installment paid before the due date
August 27, 1995Law No. 80(modifications to Law No.4l)Repayment in 1995–99 by five annual installments with balances subject to interest based on last two rates paid on bonds and debt fees as established by the central bankUnchangedPrevented a largescale liquidation of real estate and financial assets, revived the real estate and stock markets
December 6, 1995Deadline for the first installment repayment (KD 469 million)KD 203 million (43 percent of total) repaid
April 6, 1996Deadline for delayed payment of the first installmentUnpaid balances subject to 15 percent interestKD 358.6 million (77 percent of total) repaid

Among other elements of this broad attack on the “difficult debts” were the following: banks and debtors were to commence settlement talks immediately; debtors were to supply personal financial data within one month; and banks were to prepare individual “settlement programs,” which debtors had two weeks to approve. The DCFSP made provision for legal action against debtors should they (1) fail to submit information; (2) reject the proffered settlement program; or (3) submit misleading information to the banks. Settlement terms would depend on debtors’ cash flow and debtors could keep their principal residence and KD 1,000 a month of income. Portions of debts not covered by collateral could be rescheduled at an interest rate not exceeding 7 percent; settlements with debtor companies could be converted to equity in the company, at the bank’s option; and in order to sustain confidence in the creditor banks, the authorities guaranteed bank deposits, and also shareholders’ equity position at the end of 1985.

Although the central bank was heavily involved in day-to-day operations of the commercial banks, progress in reaching agreement between the commercial banks and debtors was slow and deterred by administrative difficulties and general operational uncertainty. As the list of provisions suggests, the DCFSP was a complicated program that placed the burden of debt negotiation principally on individual banks and debtors. In the long run, which in this context means until the crisis of 1990, the DCFSP was not very successful; the record shows that many debtors did not register and not much was recovered. Indeed, when the shock of the Iraqi invasion struck the Kuwaiti financial system, neither the debt collection process nor the moral hazard repercussions of the Souk Al-Manakh had been resolved.

Recognizing the slow progress under the DCFSP, another initiative was announced in December 1989. It aimed to achieve a settlement with the 54 percent of debtors owing less than KD 25,000, whose aggregate debt amounted to only 2.5 percent of the total amount of nonperforming loans. These debtors were given until February 1990 to register. However, participation was minimal due to administrative difficulties and the uncertainty as to whether penalties would be imposed for noncompliance. Some inter-mediate debt-reduction initiatives were also implemented, but most of these efforts were rendered moot by the Iraqi invasion in 1990, which aggravated the debt problem.

Purchase of Bad Debts

After liberation, many of the loans held by the Kuwaiti financial sector prior to the invasion were regarded as uncollectible. As discussed in Section II, physical assets had been destroyed and inventories looted, real estate values had plummeted, and many businesses were no longer viable. Virtually no debt-service payments were being made, so that almost the entire loan portfolio of the financial sector was regarded as nonperforming.

Immediately after liberation in 1991, all housing loans on the books of the Credit and Savings Bank (amounting to about KD 1 billion) were forgiven, as were consumer loans made by the commercial banks to Kuwaiti nationals outstanding at the time of the invasion (KD 369 million). Law No. 32 of 1992 established Phase 1 of the new debt-collection program. The government, with the central bank acting as its agent, purchased against the issue of government bonds all difficult debts from the commercial and specialized banks and investment companies, including the local real estate portfolio of the KFH. The difficult debts were defined very broadly as all credit facilities, cash and noncash, extended by local banks and investment companies to their Kuwaiti customers at their book value as of August 1, 1990. An additional factor was the accrued interest from August 2, 1990 to the purchase date of December 31, 1991, less some minor deductions. This virtually meant that the government assumed the burden of all bad debts by Kuwaiti nationals, thus replacing the private sector indebtedness by a large, public sector debt obligation. In place of the bad debts, the financial institutions received government DCP bonds. Local banks and investment companies received 20-year bonds with a maximum 10-year grace period, and 10-year bonds for the real estate portfolio of the KFH. The total amount of debt purchased in 1992 was KD 6.3 billion.

The interest rate on the bonds is determined by the central bank, taking into account the cost of funds of the financial institutions during that year. As required by Law No. 32, the transaction was back-dated to 1991, and the interest rates for 1991 were specified as 5 percent for 20-year bonds and 1.7 per-cent for the 10-year bonds held by the KFH. The banks were deemed to have held the bonds for the entire year 1991, and the interest received (KD 260 million) enabled them to close their 1991 accounts. The debt bond interest rates specified by the central bank for 1992 were 6 percent for 20-year bonds, and 5.5 percent for 10-year bonds. The amount of interest paid also reflected the cancellation of debt settlement bonds as the counterpart of the withdrawal from the commercial banks of special government deposits. In 1993 the interest rate was 5.5 percent, and in 1994 it was 5 percent in the first half year and 4.875 percent in the second. For 1995 the debt bond interest rates were set at 5.8 percent for both 20-year and 10-year bonds, and the total interest paid was KD 220 million.

Debt bonds outstanding at local banks declined to KD 4.1 billion at the end of 1993, KD 3.8 billion in 1994, and KD 3.4 billion in 1995. A further decline to about KD 2.7 billion is forecast for 1996 associated with bond redemption under the first and second installments (see below).

Recovery of Bad Debts

Following the implementation of Phase 1, attention focused on the second phase—the recovery of bad debts. Law No. 41 of 1993, as amended by Law No. 102 of 1994, provided two repayment options: an early cash settlement of the debt at a 25–46 per-cent discount by September 7, 1995 or a settlement at face value over 12 years with 8 percent discount for an installment paid before the due date. The first option, which 98.5 percent of the debtors selected, provided for increasing debt forgiveness for debtors owing less than KD 0.5 million according to the following schedule specified in the law.

Amount owedRepayment
Less than KD 50,00025%
KD 50,000 to less than KD 100,00030%
KD 100,000 to less than KD 250,00035%
KD 250,000 to less than KD 500,00040%
KD 500,000 and above45.6%

In order to encourage immediate cash repayment during the two-year grace period, the discounted payment was further reduced by 0.5 percent for each three-month term of the precipitated payment. Law No. 41 granted the debtors a settlement grace period to give them sufficient time to arrange their financial positions and to encourage them to opt for immediate cash settlement. During the grace period, creditors were obliged to authenticate a complete declaration of their debt, according to entries in the bank’s records. Penalties for fraud or concealing data to evade settlement of debt include jail for up to five years, a fine of not more than KD 5,000, or both.

Responding to the growing concerns of the general public that the one-time repayment could lead to either widespread default or to large-scale liquidation of real estate and financial assets, the National Assembly passed Law No. 80 on August 27, 1995, amending provisions of Law No. 41. Under Law No. 80, option 1 was modified as follows: the cash settlement of the debt would now be observed in five equal annual installments, the first of which fell due on December 6, 1995; the remaining payment will mature on September 6 of the following four years in accordance with the relevant proportions and brackets specified in the repayment schedule. A debt-service charge is debited to each payment, except the first payment, and calculated on the ground of decreasing balance of the debt amount under the first payment. Its rate is fixed by the central bank on the basis of the average rate paid on the debt instruments in the same year. Although widely discussed, an extension of the pay period under option 2, from 12 years to 20 years, was not approved.

The payment period could be extended for customers who have been in default of settlement payment on the maturity date of December 6, 1995. This period was not supposed to exceed four months with an additional default fine at the rate of 15 percent per annum charged on any balances outstanding. The changes specified that the debt fell due and debtors were considered liable to repay the whole amount of it, including any amount written off, if they had failed to express their choice regarding the method of settling the debt within the period of three months from the operative date of Law No. 80; if the debtor had violated any of the obligations imposed under the provisions of Law No. 41 of 1993, its amendments and implementing regulations; or if the debtor had been in default of settling matured payments due more than twice regarding immediate spot cash settlement or more than three times regarding the scheduled repayment.

The Analytics of the DCP: The Framework

The DCP may be thought of as an attempt by the government to induce payment consistent with the ability and willingness of Kuwaitis to pay. Indeed, the individual indebtedness problem in Kuwait may be described in terms of the Laffer curve used by many for analysis of international debts (see Sachs (1989), Krugman (1989), and Claessens (1990)) and applied here to personal debts as a tool for under-standing the rationale for debt reduction. The curve graphs expected repayments as a function of the face value of the debt service and illustrates the hypothesis that there exists an “optimal” level of total individual debt exposure, which maximizes debt repayments (Figure 6.1). Along one side of the curve, an increase in the face value of debt service leads to an increase in repayment, while along the other side of the curve increases in the face value of the debt reduce expected repayment. It also shows that the higher the debt of an individual, the larger the probability of nonpayment and thus the greater the secondary market discount on that debt. If debt is high enough, further increases in its level may actually lead to a smaller expected value of repayments. Preconditions for the debt reduction policy to work are to get the individuals on the right side of the Laffer curve and ensure strong discipline and compliance.

Figure 6.1.Kuwait: Individual Debt Laffer Curve

The following is an intuitive example. On a horizontal axis is the nominal value of a person’s debt; on the vertical axis the expected debt collection. The personal financial situation of people mentioned in Figure 6.1 is quite different. At lower levels of debt, nominal claims on individuals may be expected to be fully repaid, so that the outcome lies along and above the 45 degree line. Debtors A and B are well above it, meaning that on the due day they can repay all their current debt installment, and even some parts of the following installments if so requested or if they want to. Debtor B is clearly better off since his current debt outstanding is relatively low and his solvency is extremely high. Debtor C, who is on the 45 degree line, can also meet the claims, but will pay nothing more than is required from him under the current installment. In practice, however, it is difficult for the authorities to differentiate among these debtors.

At higher levels of debt the possibility of nonpayment grows, so that the expected payment traces out a curve that falls increasingly below the 45 degree line. Although increased levels of debt above point X will be associated with lower secondary market prices, the secondary market value of debt will, at first, still increase, although debtors D and E will not be able to repay all their debts. These two debtors, although below the line, are still on the right (ascending) side of the debt Laffer curve. This means that they still have enough funds to ensure growing repayments of their debt, even if their overall debt exposure continues growing. Their repayments will be increasing disproportionally to the debt increase. At high enough debt levels going above Y the disincentive effects may be large enough so that the curve actually turns down. The larger the debt becomes, the less the debtors repay. It is, therefore, in the best interest of the government to find a way of having a part of their debt forgiven and thus to move them back to the right side of the curve so that their repayments on debt are kept increasingly parallel to their debt outstanding.

In spite of the difficulty of applying the concept of the individual Laffer curve in practice, it remains a useful tool of policy analysis. Since the shape of the curve is not clear, the model can be only approximated by the following simple illustration. Consider an individual who has a large outstanding obligation under the DCP. His total debt outstanding is x, and sources for debt repayment consist of his salary, which is already committed as a collateral for the consumer loan, and his personal savings, both domestic and abroad. Where is this person on the debt Laffer curve? Is he on its “right” or its “wrong” side?

Since the debt collection is a function f(x) of the nominal value of debt outstanding, initially given that x > 0 and f(x) > 0 the relationship between the two within the debt Laffer curve can be approximated as a regular quadratic polynomial function on all the [O, Z] range:

In the simplest case on [O, X] a = 0, the function becomes linear with the slope b and c as the f(x) intercept value:

The slope of the ray from the origin will measure the ratio of expected payment to nominal debt. This ratio will be b for debtor C, but lower (b’) for debtor D. Distance c can be thought of as additional funds available for selected debtors such as debtor A (+c) for early repayments of the future installments, or as a shortage of funds for current repayment (-c). If the indebted person has enough money for current and future repayments he will join the company of debtor A. On [OX] debt repayments are proportional to the nominal value of debt with a ratio of 1:1, b = 1 and c = 0, which gives the line a slope of 45 degrees starting from the origin. If the individual is on or above this part of the curve, it means that he can pay either all of or more than the current installments. If the government has information on this, it has no interest in writing off the debt.

If the individual’s total debt keeps on growing beyond X to Y he moves himself to a problem zone—his marginal debt repayments first decline and then, when the debt rises further from Y to Z, become negative. The interdependence now traces a quadratic parabola of an unknown shape. The search for an answer to the question, on which part of the curve within [X, Z] the individual is, consists now of a three-step process: first, finding the amounts of current debt and corresponding debt repayments at a critical point; second, proving that this point is the maximum; and third, finding out on which side around this point the curve actually rises and on which side it declines.

The critical point (minimum or maximum) on the curve where the tangent line is horizontal can be easily found through the first derivative as:

The debt Laffer curve function is continuous on a closed interval [X, Z], thus/(x) has both a maximum and a minimum value. To assure that the above point (–b/la; c–b2/4a) is the maximum for the/(x), the second derivative test for local extreme can be used. Since the function has a critical point, for which the first derivative is equal to zero, it has a local maximum there if the second derivative is negative. In our case

Thus, the debt Laffer curve is at maximum at point (–b/2a; c –b2/4a) when a < 0. At this point the first derivative changes its sign from positive showing an increasing function to negative showing a de-creasing function. Thus, the individual is on the right side of the curve, if at each point in the interval [X, Y]

Since the function on [A, B] grows, it makes no sense for the government to write off any of the individual’s debts.

The individual is on the wrong side of the debt Laffer curve, if at each point in the interval [Y, Z]

Only in this case the individual is on the wrong side and a reduction by the government of his total debt outstanding will increase expected repayments.

Although this type of analysis is highly abstract, it illustrates that if the person is on the wrong (declining) side of the debt Laffer curve, a reduction in nominal claims outstanding will lead to an increase in their secondary market value and, thus, benefit the government, which is the de facto lender of last resort in this case. If the person is on the correct (ascending) side of the debt Laffer curve, debt forgiveness will not increase the market value of his debt, and the government will simply lose a certain amount of repayments.

The Analytics of the DCP: A Preliminary Application

While it is too early to undertake any definitive analysis of the DCP, some initial remarks may be made; these will need to be extended as additional experience is gained with the implementation of the DCP.

Debtors under the DCP at its inception were clearly divided into two groups (Table 6.2). About 90 percent of them were “small” debtors, owing up to KD 0.5 million each. About half of them were “very small” debtors with total outstanding debt of less than KD 10,000 each. The average debt per person for this group was about KD 50,000 and they owed only 7 percent of the total debt. The debt relief under the first option of DCP was especially designed for those small debtors who might well have been on the “wrong” side of the debt Laffer curve. According to the schedule mentioned above, debtors with less than KD 50,000 of total debt were forgiven 75 percent of its value, which effectively moved them to the “right” side of the debt Laffer curve and inspired repayments.

Table 6.2.Debt Collection Program
TotalPrecent of Total
Category of Debtors(In millions of Kuwaiti dinars)DebtorsDebtDebt per Person(In millions of Kuwaiti dinars)DebtorsDebt
0–0.0011,0140.50.0009.50.0
0.001–0.0031,2712.50.00211.80.0
0.003–0.0059814.00.0049.10.1
0.005–0.0077254.30.0066.80.1
0.007–0.016715.60.0086.30.1
0.01–0.0251,58125.50.01614.70.4
0.025–0.597234.90.0369.10.5
0.05–0.185260.80.0717.90.9
0.1–0.1543152.90.1234.00.8
0.15–0.226746.20.1732.50.7
0.2–0.2522250.00.2252.10.7
0.25–0.316946.40.2741.60.7
0.3–0.3514647.40.3251.40.7
0.35–0.410037.40.3740.90.6
0.4–0.459339.20.4220.90.6
0.45–0.58640.80.4750.80.6
Total (1)9,581498.50.05289.37.4
0.5–1406292.70.7213.84.3
1–2264376.91.4282.55.6
2–3115281.22.4461.14.2
3–469239.03.4630.63.5
4–551223.14.3740.53.3
5–764380.45.9440.65.6
7–1055460.48.3710.56.8
10–2067938.514.0070.613.9
20–3021507.124.1490.27.5
30–4012410.934.2430.16.1
40–504172.343.0740.02.5
50–708444.655.5790.16.6
70–1005400.380.0670.05.9
100–1503335.8111.9410.05.0
150–2001158.3158.2940.02.3
Above 2002638.4319.2120.09.4
Total (2)1,1476,260.15.45810.792.6
Total(1) + (2)10,7286,758.50.630100.0100.0
Source: Central Bank of Kuwait.
Source: Central Bank of Kuwait.

The outcome of the first installment repayment under the DCP was generally encouraging. By the deadline debtors repaid 77 percent of the amount due (Table 6.3). Some 376 debtors repaid both the first installment and all remaining installments totaling KD 41 million, and 226 debtors repaid the first installments and some portion of the remaining debt to a total of about KD 8 million. Available statistics suggest that 75 percent of debtors met their payments by the April date, implying that the DCP succeeded in tapping into debtors’ willingness and ability to pay. According to very rough estimates, funds for the repayment were drawn from four major sources: refinancing, individual savings, repatriation of foreign assets, and some liquidation of domestic assets. Since total domestic deposits, both in Kuwaiti dinars and foreign currencies declined slightly, it is possible that a sizable proportion of the repayment was financed though repatriation of foreign assets. There has been little evidence of liquidation of assets and the repayment has not had any ad-verse effect on the asset value or on the Kuwait Stock Exchange where activities remained buoyant during January-March 1996.

Table 6.3.DCP: Outcome of the First Installment Repayment on April 6, 1996(In millions of Kuwaiti dinars; percentage is in parentheses)
All DebtorsObligations MetObligations Not Met1
Amount dueAmount paidAmount
Total due464.6(100.0)353.4(100.0)111.2(100.0)
Total paid358.6(77.2)353.4(100.0)5.1(4.6)
Number of debtors3,451(100.0)2,600(75.3)851(24.7)
Source: Central Bank of Kuwait. ‘Debtors who paid nothing or anything less than the full installment.
Source: Central Bank of Kuwait. ‘Debtors who paid nothing or anything less than the full installment.

Conclusions

The recent experience of dealing with the individual financial problems in Kuwait under the DCP points to three important conclusions.

First, the 1995 DCP modification is the most successful of a series of attempts to deal with the problems of nonperforming loans in Kuwait. The consistent implementation of the DCP and its timely amendment prevented either large-scale default or disruptive liquidation of real estate and financial assets. Progress in the implementation of the DCP has also helped to revive the real estate and stock markets in Kuwait and, more generally, restore confidence in the financial system.

Second, the DCP may be thought of as a mechanism to overcome a domestic “debt overhang” problem. Its success depends on implementing the “right” level of debt reduction combined with sound payment improvement measures. Provision of a limited amount of public funds to a group of debtors on the “wrong” side of the debt Laffer curve may present a sufficient inducement for them to under-take stronger individual payments efforts. Their move to the “right” side of the curve will help to make the whole debt-relief scheme Pareto-improving if the fiscal burden of any anticipated debt-reduction measures is carefully assessed. At the same time, it is worth mentioning that debt forgiveness cannot be viewed as the only alternative to other strategies of market-based debt handling, such as debt swaps, securitization, or secondary market debt buy backs.

Finally, although the initial results of resolving the nonperforming debt problem are encouraging with large repayments under the DCP, continued success of the program will depend on its strict implementation, including timely legal actions against nonpayment through civil procedures, penal procedures, or both. The initiation of collection procedures and strict enforcement of penalties for those debtors that fail to make payments under the DCP will be important to strengthen policy credibility of the DCP and, thus, to demonstrate the government’s commitment to addressing the problem of the moral hazard in the financial system more generally.

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1Called Difficult Credit Facilities Settlement Program (DCFSP) in 1986-92 and Difficult Debt Settlement Program (DDSP) in 1992-95.
2This focus on foreign shares resulted, in part, from restrictions on trading nonresident shares on the Kuwait Stock Exchange.
3To put the magnitude of the Souk Al-Manakh episode in perspective, just before its collapse the amount of outstanding post-dated checks for trading payments was estimated at KD 27 billion, more than three times Kuwait’s 1982 GDP. See Azzam (1983) for details.

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