There has been increasing interest in creating bonds linked to the growth of a countries' gross domestic product. At the spring meetings of the International Monetary Fund and the World Bank, both potential issuers and investors expressed a clear appetite for such bonds. The servicing of these GDP-linked bonds would be higher in times of rapid growth and lower when growth was slow or negative.

GDP-linked bonds would have important advantages when compared with conventional debt for borrowers and investors, as well as significant externalities for the international financial system. For borrowers, issuing such bonds would help stabilise public spending throughout the cycle as governments would service more debt when they could better afford to, and less in more difficult times. It would also significantly reduce the likelihood of costly and disruptive defaults and debt crises. Defaulting on debt is a last-resort that governments find highly undesirable and costly to the country's international reputation. A temporary reduction of a country's debt service when the economy deteriorates would facilitate more rapid recovery.