Corporate and Household Debt Distress in Latvia: Strengthening the Incentives for a Market-Based Approach to Debt Resolution

26 Pages Posted: 26 Apr 2011

See all articles by Michaela Erbenova

Michaela Erbenova

International Monetary Fund

Yan Liu

International Monetary Fund (IMF)

Magnus Saxegaard

International Monetary Fund (IMF)

Date Written: April 2011

Abstract

This paper reviews Latvia’s efforts to manage the increase in debt distress resulting from the unwinding of the 2000-07 credit boom and spillovers from the global financial crisis. The authorities have designed a strategy that strengthens incentives for marked-based debt resolution by improving the legal framework for credit enforcement, introducing tax incentives for debt write-downs, and strengthening financial sector supervision. These measures have started to yield results, but further steps are needed to speed up bankruptcy procedures and reduce credit enforcement costs. Latvia’s experience with market-based debt resolution may provide insights on managing debt distress in other countries with limited fiscal resources.

Keywords: Bank supervision, Banking sector, Corporate sector, Debt, Debt restructuring, Latvia, Private sector, Tax incentives

Suggested Citation

Erbenova, Michaela and Liu, Yan and Saxegaard, Magnus, Corporate and Household Debt Distress in Latvia: Strengthening the Incentives for a Market-Based Approach to Debt Resolution (April 2011). IMF Working Paper No. 11/85, Available at SSRN: https://ssrn.com/abstract=1822951

Michaela Erbenova

International Monetary Fund ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

HOME PAGE: http://www.imf.org

Yan Liu

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Magnus Saxegaard (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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