Archive for January 13th, 2023

The political origin of financial market dislocations: How an amusement park developer’s illiquidity turned into a credit market crisis

January 13, 2023

Burçin Kısacıkoğlu and Sang Seok Lee in this voxeu article narrate this interesting history from Korea:

On 28 September 2022, Gangwon province’s newly elected conservative governor, Kim Jin-tae, unexpectedly declared that he would not honour the local government’s guarantee on the A1-rated (the highest rating) asset-backed commercial paper (ABCP) of Gangwon Jungdo Development Corp (GJC), the developer of the Legoland Korea amusement park located in the same province. There was no indication prior to the announcement or since then that the local government was under financial pressure: the missed payment was not due to budgetary reasons. It is understood that the new governor refused to make the payment due to political/ideological considerations as Legoland Korea was associated with the previous liberal governor (Nam 2022, Park 2022). Indeed, the 205 billion won (around $144 million) that was owed by GJC was a minor item for the local government and it was not being asked to pay back the entire amount (Park 2022). GJC missed the payment on 29 September and the default was declared on its asset-backed commercial paper on 5 October.

Explainer on Pakistan’s economic crisis

January 13, 2023

I explain Pakistan’s economic crisis in moneycontrol. The economy has faced many such crises in the recent past but this one is much more intense and worrisome.

There was a time Pakistan was growing faster than India from 1960s to 1980s and has slipped ever since. Pakistan’s polity has ignored calls for economic reform for a long time. They have just lived off aid and financial assistance hoping for things to continue forever. The easy monye has stopped creating multifold problems.


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