As far as I am concerned, we are all stewards of capital and structural reform of the world’s capital markets will support our efforts.
The importance of creating a deep, open government bond market is often not appreciated. But it can set in motion a series of events that leads, ultimately, to cheaper borrowing costs, improved insulation to outside shocks and increased headroom for development spending. And, this can all translate to faster social development.
It isn’t wishful thinking. It has been shown to work in countries as diverse as Russia, Poland, Malaysia and Mexico.
Ease of access for international investors helps develop liquidity and allow the development of a proper yield curve.
This improves a market’s chances of being included in the key bond indices, which in turn draws in more long-term investors such as central banks and sovereign wealth funds. It also strengthens the country’s claims to a superior credit rating. Lower borrowing costs are the natural corollary.
It is a virtuous circle. Lower borrowing costs mean a country’s yield-to-GDP ratio falls, allowing it to borrow and invest more in social development.
The ADB conference agenda focused on ‘development challenges and opportunities’. I would suggest that market reform is another of the big opportunities on offer.