Sovereign Debt as Soft Governance: IMF Veto Power, Dollar Safe-Asset Privilege, and the Distributional Costs of Conditionality

Abstract

 Purpose: This study proposes an integrated political-economy framework that links the global safe-asset regime centred on United States Treasury securities, the International Monetary Fund’s quota-weighted veto structure, and the distributive effects of policy conditionality. It asks how these three mechanisms jointly shift adjustment costs toward low- and middle-income countries while preserving reserve-currency privilege for core creditors. Design / Methodology / Approach: A secondary, multi-method design combines (i) a PRISMA-guided systematic literature review, (ii) cross-case synthesis of Ghana and Sri Lanka, and (iii) panel System-GMM tests for 120 countries (2000-2025) augmented by synthetic-control estimates around IMF programme onsets. Findings: Results confirm three propositions: the U.S. convenience yield is large and persistent; the IMF’s 85 percent super-majority rule confers de facto veto power on a small creditor bloc; and higher structural-conditionality intensity correlates with rising Gini coefficients and poverty headcount within five years of programme entry. Research Implications: The fused model offers testable pathways—from global demand for safe assets through institutional agenda control to country-level inequality—that future scholars can probe with micro-data or natural-experiment designs. Practical Implications: Policy recommendations include (i) accelerating quota and voice reform to dilute veto concentration, (ii) embedding social-spending floors and shock-contingent relief in programme design, and (iii) instituting transparent disclosure of creditor composition to facilitate equitable burden-sharing in debt workouts. Originality / Value: By unifying macro-finance, global-governance, and comparative-political-economy literatures, the article reframes “exorbitant privilege” as a form of soft governance and introduces biblical Jubilee principles—“proclaim liberty throughout the land” (Leviticus 25:10) and periodic debt release (Deuteronomy 15:1-2)—to evaluate sovereign-debt architecture, echoing the warning that “the borrower is a slave to the lender” (Proverbs 22:7).