MJIEL Vol 10 Issue 1 2013 - Article 1

International Organizations as Sovereign Bondholders: 
An Unexplored Dimension of the Sovereign Debt Crisis

Rutsel Silvestre J. Martha*

ABSTRACT: Debt instruments issued by governments of the advanced economies have long been considered safe investments by international organizations looking for opportunities to store the resources that they do not immediately need for their operations. With the credit rating of these countries being downgrading resulting in illiquid assets in the portfolios of several organizations, and in some cases forced restructuring involving ‘haircuts’, international organizations holding sovereign bonds are compelled to reconsider their investment policies. A key question in that process is whether the status of international organizations under international law entitles them to certain treatments that would justify approaches that differ from those of ordinary investors.  This article discusses some emerging issues related to the exposure of international organizations to the sovereign debt crisis that is affecting mainly the Eurozone countries and provides some tentative answers that suggest that the foregoing question should be answered affirmatively.

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