Data: Knomad; Chart: Axios Visuals

Bankruptcy is not an option for sovereign borrowers. That's not a big problem for countries like the U.S. that can borrow unlimited amounts in their own currency.

Yes, but: It's a huge problem for most countries that need to fund their coronavirus response while also servicing existing debts. For those countries, one solution is the creation of new obligations issued at a super-sovereign level.

Two big ideas along those lines are the proposals that the IMF should issue $500 billion in new Special Drawing Rights and that the EU should issue perpetual bonds (subscription).

Poor countries should also be able to push back their payments to private-sector bondholders for 12 months. A new proposal from a group of authors, including sovereign debt guru Lee Buchheit, suggests a clever way for them to do that.

  • Countries would instead send the payments to the World Bank, which would use them to fund a new credit facility.
  • That facility would then immediately lend the money back to the sovereign, to be used to fight COVID-19.

Here's why it makes sense for countries to send payments to the World Bank, just for those monies to come straight back again.

  • The Bank can certify that the funds will be used to fight the virus.
  • After a year, the countries would repay the Bank, with interest. (Thanks to its preferred creditor status, it nearly always gets repaid.) The Bank, in turn, would pass the money on to bondholders.
  • The bondholders would have very little incentive to sue for their missed coupon payments, because it would be cheaper and easier to just wait a year to get their money from the Bank. (If countries are sued, there's a "doctrine of necessity" they will be able to use to defend themselves.)

By the numbers: According to the World Bank, remittances to poor countries — the most important way they get money from abroad — are expected to fall by an unprecedented $109 billion this year. That also happens to be roughly the amount of money those countries need to spend on servicing foreign bonds.

Go deeper: The IMF's coronavirus depression projection is a show of optimism

Go deeper

Updated Oct 7, 2020 - Health

World coronavirus updates

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Data: The Center for Systems Science and Engineering at Johns Hopkins; Map: Axios Visuals

New Zealand now has active no coronavirus cases in the community after the final six people linked to the Auckland cluster recovered, the country's Health Ministry confirmed in an email Wednesday.

The big picture: The country's second outbreak won't officially be declared closed until there have been "no new cases for two incubation periods," the ministry said. Auckland will join the rest of NZ in enjoying no domestic restrictions from late Wednesday, Prime Minister Jacinda Ardern said, declaring that NZ had "beat the virus again."

CDC director says he was not involved in decision to change coronavirus data reporting

CDC director Robert Redfield testified Friday that he was not involved in the Trump administration's decision to bypass his agency and instead have hospitals send coronavirus data to the Health and Human Services Department.

Why it matters: According to the COVID Tracking Project, data on coronavirus hospitalizations has been "unstable since July 15" — five days after the change.

Mike Allen, author of AM
Jul 31, 2020 - Politics & Policy

Biden campaign vows virus focus

Joe Biden puts on a mask after a campaign event in Wilmington, Del., on Tuesday. Photo: Andrew Caballero-Reynolds/AFP via Getty Images

Joe Biden's campaign contends that President Trump's talk of delaying November's election is an effort to distract, and vows to be what a Biden aide called "laser-focused" on Trump's pandemic response.

Why it matters: After aides convinced the president that the issue was hurting him badly in the polls, Trump has tried for the past two weeks to show renewed focus on the coronavirus, including the restoration of his briefings.

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