GDPlinkers.org is an online forum set up by a group of like-minded private sector investors, lawyers and economists who believe that the current financial system must be reformed to better serve the global economy and improve people’s lives.  We believe a key step is to introduce more flexibility into the international financial system through the issuance of state-contingent debt instruments, specifically sovereign GDP-linked bonds: GDPlinkers.  

GDPlinkers are a variant of a local currency denominated bond with a principal payment at the end of a fixed term. However, for a GDPlinker both interest and principal payments vary with the level of a country’s nominal GDP, rising when its GDP increases, and falling when its GDP declines. As such, GDPlinkers are not the same as GDP-linked warrants, which have been issued in certain debt restructurings. GDP-linked warrants are bespoke instruments designed on a case-by-case basis to enhance the terms of a given restructuring by offering creditors greater future pay-outs if the country’s GDP growth exceeds certain limits over time.  There continues to be a role for GDP-linked warrants in these limited circumstances, but they do not provide across-the-board benefits that GDPlinkers would provide.

The global economy is currently characterised by high levels of public and private sector debt in advanced economies, alongside debt vulnerabilities in many emerging market and developing countries. In spite of this, in the absence of GDPlinkers, governments mainly borrow at fixed interest rates and repay fixed principal amounts even though they are subject to economic, environmental or other shocks beyond their control that can imperil their financial position and lead to debt distress or default.  

We have all seen the costs (both human and economic) of past sovereign debt defaults and similar crises.  We are also witnessing the impact (both political and economic) of the years of fiscal austerity that policymakers have pursued to their (often unsuccessful) attempts to rein in spiralling debt. 

We believe that introducing sovereign GDPlinkers — alongside a government’s conventional debt — will help contain the debt spiral, spur new growth-enhancing policies and lessen the risk of debt distress. Further, GDPlinkers would provide new policy options for debt reduction beyond austerity and sovereign debt restructurings.  A global market in government GDPlinkers would also provide new, much-needed long-term investment opportunities for pension funds and asset managers.  Yet even with these and other potential benefits, GDPlinkers remain in the theoretical realm.

With this website we hope to make GDPlinkers a reality by bringing together the work of thought leaders on this topic and by creating a network of supporters to persuade policymakers in both advanced and emerging market countries to embrace this new asset class.