Developing Countries' Attractiveness for Foreign Direct Investment--Debt Overhang and Sovereign Risk As Major Impediments?(International CAPITAL Flows) (Report‪)‬

I. INTRODUCTION With declining debt inflows, foreign direct investment (FDI) has again become one of the major pillars of private financial flows to developing countries (DCs). This has created some expectation to replace private bank lending by FDI. However, many heavily indebted countries may not only be constrained in terms of new private lending, but also in terms of FDI inflows.