On April 22 and 23, 2025, the Princeton Sovereign Finance Lab (PSFL) hosted the second annual Politics of Sovereign Finance conference at Princeton SPIA’s Washington, DC space. The event coincided with the spring meetings of the International Monetary Fund and World Bank. Attendees included staff from various departments of the International Monetary Fund and the World Bank; government officials from several countries; academic researchers from political science, economics and law; civil society participants; and private sector investors. Ph.D. students and MPA students from Princeton University also participated.
PSFL Director Layna Mosley and PSFL Research Director Peter Rosendorff introduced the event by summarizing PSFL’s ongoing work on the domestic and international politics of sovereign debt. On the domestic politics side, this includes exploring how domestic holdings of government bonds affect decisions around debt repayment and restructuring, as well as how information about international investors’ assessments affects citizens’ approval of political incumbents. At the international level, PSFL researchers are considering how private investors’ assessments of sovereign risk are related to the composition of a country’s creditors, as well as how the rise of China affects non-democratic countries’ capacity to borrow. Lab members also are developing new measures of debt transparency.
In the first session, moderated by Anna Gelpern (Georgetown Law), panelists explored the internal determinants and consequences of sovereign credit. PSFL Faculty Affiliate Cameron Ballard-Rosa (UNC) presented work linking public approval of national governments with changes in sovereign credit ratings. Mark Manger (University of Toronto) introduced new data on emerging market bond issuances, differentiated by currency as well as residence. Tamon Asonuma (IMF) discussed how defaults affect public investment. Martin Guzman (Columbia University) explored how emerging economies face tradeoffs between access to capital and monetary sovereignty.
The second session focused on climate finance and international financial institutions. Jill Dauchy (The Potomac Group) chaired a session that featured presentations related to climate adaptation finance (Katya Gratcheva, IMF) and green bond issuances (Fiona Bare, Princeton University). Other panelists explored the drivers of the World Bank’s climate finance activities (Ayse Kaya, Swarthmore College) and attention to climate-related issues among IMF staff members (Noah Zucker, London School of Economics). Much of the conversation revolved around how addressing climate issues via finance involves both supply side (provision of finance, by international institutions as well as private investors) and demand side (creation of and requests to fund projects) dynamics. At the conclusion of this session, attendees enjoyed a lovely April evening on the rooftop space, with views of the National Cathedral as well as the Washington Monument.
The second day opening session, chaired by Erik Voeten (Georgetown University), began with presentations on the World Bank’s Debt for Development (D4D) swap program. David Mihalyi (World Bank) noted that he had presented research on the results of prior swap programs at PSFL’s 2024 DC conference; the findings from that work informed the World Bank’s swap design. He provided details of the Cote d’Ivoire swap; in a subsequent presentation, Martin Kessler (Finance for Development Lab) offered further analysis of this same debt swap.
Other panelists presented new data on how variation in international financial institutions’ membership helps to predict lending to countries with non-democratic political institutions (Christina Cottiero, University of Utah), and on how Chinese lenders use collateralization as part of their sovereign lending practices (Bradley Parks, AidData/William and Mary). Paola Subacchi (Sciences Po) wrapped up the session by turning attention to U.S. sovereign borrowing. Her presentation considered whether European central banks (and other investors) ought to continue to hold U.S. Treasuries – and to continue to fund U.S. federal debt.
Wednesday morning also featured a session, chaired by Mark Flanagan (IMF), on forecasting economic growth, sovereign debt and debt sustainability. Reina Kawai Eskimez (World Bank) used forecast errors in the World Economic Outlook growth forecast as a means of evaluating how unexpected shocks affect fiscal policy. Clemens Graf von Luckner (Stanford University) discussed efforts to create better predictions of debt distress; he stressed the predictive efficiency of the debt to export ratio. Martin Kessler’s paper offered a methodology for capturing forecast errors in the IMF and World Bank’s debt sustainability analyses for low-income countries. PSFL Research Director Peter Rosendorff (NYU) followed this with research on how geopolitical ties – relations with the US and China, among others – help to explain forecast errors. This panel ended with an especially lively conversation regarding how the debt sustainability analysis might further be improved.
Wednesday afternoon’s sessions focused on the dynamics of debt restructuring and on potential improvements to the sovereign borrowing process. Eduardo Bhatia (Princeton University) moderated a session focused on restructuring. Reza Baqir (Harvard Kennedy School; Alvarez & Marsal) and Amine Yaaqoubi (Alvarez & Marsal) discussed the problems of delay in and limited magnitude of sovereign restructurings. Andrea Presbitero (IMF) offered evidence on the economic costs of delay in addressing fiscal crises; he noted that fiscal crises are more common than debt crises, and that these episodes last 5.7 years, on average, generating significant negative effects.
Federico Cesar Sequeda (Morgan Stanley Investment Management) shifted the focus to creditor committees, exploring how these entities play a role in the restructuring of debts to private investors. This panel also included Lauren Ferry’s (University of Mississippi) research on official creditor participation in the HIPC initiative; she focused on the extent to which non-Paris Club governments offered debt relief. Anahi Weidenbrug’s (International Institute for Sustainable Development) presentation noted that low-income countries often have substantial private sector, as well as public sector, external debts. She suggested a focus on how to design better debt relief mechanisms, given the diverse creditor profile of many Global South countries.
The final session of the 2025 event turned to questions of how to better structure sovereign debt contracts, how to rate sovereign creditworthiness, and how to measure and encourage debt transparency. Sarah Brooks (Ohio State University) moderated this panel; Abby McKenna (Emerging Markets Investor Alliance) discussed how bond contracts might be used to incentivize transparency on the part of borrowing governments. Starla Griffin (Slaney Climate and Development Finance) proposed creating a “resilient” Eurobond that would reward borrowers for good governance and transparency, while also allowing them some repayment flexibility in the face of certain pre-agreed events. She noted that offering creditor enhancements could help make such new instruments more appealing to investors.
PSFL affiliate Zoe Ge (IE University) then offered initial data on a new measure of debt transparency, based on governments’ reporting to the World Bank’s Debtor Reporting System. Preliminary results indicate that financial openness correlates positively with transparency, while geopolitical alignment the US is negatively linked with transparency. Penelope Hawkins (UNCTAD) and Robertso Sifon-Arevalo (Standard and Poor’s) offered their perspectives on sovereign credit ratings. Hawkins noted that many sovereigns in the Global South are seeking to improve their relations with ratings agencies and private investors; increased transparency may be one means of doing so. After describing the typical ratings process, Sifon-Arevalo also described how he and his colleagues derive ratings for governments after defaults.
The audience for this year’s meeting was, like last year’s, diverse in terms of profession, discipline, and nationality. The event allowed for many cross-sectoral and cross-disciplinary conversations, as well as for conversations about evidence-based policymaking. The event benefits from being one of many “side events” in Washington, DC during the week of the spring IMF/World Bank meetings. Especially in 2025, when the influence of domestic and international politics on multilateral financial institutions, sovereign credit and climate finance, the meeting offered many opportunities for reflecting on the political economy of government debt.
PSFL thanks the conference sponsors – the Niehaus Center for Globalization and Governance; the Julis-Rabinowitz Center for Public Policy and Finance; the School of Public and International Affairs (SPIA); and the NYU Sovereign Debt Network. We’re also very grateful to this year’s PSFL Graduate Fellows – Tetsekela Anyiam-Osigwe, Christian Baehr and Fiona Bare – for helping the event to run smoothly, and to Danielle Pinckney (SPIA) for fabulous administrative support. We look forward to the 2026 event!
For the full program of the event, listing papers and co-authors, visit the Lab’s website.
