CREDIT AMONG REGIMES: POLITICAL AFFINITY IN SOVEREIGN BILATERAL LENDING

Why do some states lend more official bilateral credit to certain borrowers than others? This thesis argues that political regime type shapes sovereign lending relationships. Autocratic governments have strong incentives to borrow abroad but face a more limited supply of credit from democratic lenders, which may discount authoritarian borrowers on institutional and domestic political grounds. These constraints make fellow autocracies especially important creditors. Using dyadic data from the World Bank’s International Debt Statistics for 1980 to 2023 and regime classifications from V-Dem, I estimate Poisson Pseudo-Maximum Likelihood models with debtor, creditor, and year fixed effects. Autocracy-autocracy dyads hold larger bilateral debt stocks than other regime pairings, and this pattern strengthens under borrower distress. The effect is stronger when China is excluded and weaker when debt is scaled by borrower GDP, suggesting strategic rather than unconditional lending.