Explaining Variation in Borrowing Portfolios

This chapter illustrates that borrowing patterns differ significantly across developing countries, even if they have the same credit rating, income level, and degree of democracy. Some rely on private creditors, others on multilateral institutions; some use loans from Western governments like the United States, while others borrow from emerging creditor governments such as China. These empirical patterns suggest that it is not only creditors who determine loan allocations, but that recipient governments have preferences and act upon them. This book argues that governments choose their creditors to satisfy the demands by the dominant societal interest groups. These groups prefer one type of creditor to others because the conditions attached to the monetary transfers imply positive (or negative) distributional consequences for the groups. The chapter concludes with a preview of the qualitative and quantitative evidence presented later in the book.