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Consider any three countries currently in the news and construct an analytical discussion on what constitutes/explains their sov - Essay Example
Author : tillmanpatrick
Finance & Accounting
Pages 16 (4016 words)
SOVEREIGN RISK Instructor Institution Submission Date Discussion Sovereign countries advance and receive loans for diverse reasons ranging from infrastructural development, on humanitarian basis as well as for general economic development. The global financial institutions such as the World Bank offer the credit facilities to nations through which many countries have been in a position to realize development and to facilitate the development projects, which are rather challenging for the sovereign countries to realize without the loan facilities…
Sovereign countries have no capacity to go broke but have the ability to assert their independence where without their consent; they cannot be sued for failure to consent to the terms of loans acquired. Therefore, the probability that a country or a state managed agency would fail to comply and go as per the loan agreement during such instances as difficult financial times or during political crisis is what is referred to as the sovereign risk. This probability differs from a country to another due to the government and economic frameworks guiding the economic performance of the countries. Besides the government’s capacity to borrow on behave of a country, corporate within a country as well as foreign investors have the capacity to borrow credit facilities from the local financial institutions as well as across the countries. The governments rely on the financial assets as well as government bonds to offset the acquired debts. ...