This paper explores a role for capital control policies in enhancing a sovereign’s commitment to repay its debts. I study the equilibrium of an economy in which a sovereign must finance some expenditure, is constrained by the savings decisions of domestic households, and cannot discriminate between foreign and domestic lenders. I show that capital controls are crucial for implementing an equilibrium with lending from abroad when domestic disposable income is low. The distortion controls affect on bond prices crowds in domestic lending, enforcing repayment. In an environment with uncertainty over the cost of default, the sovereign exploits the commitment device that capital controls afford to mitigate, but not eliminate, default risk due to the distortionary cost of controls and the option value of default. The paper offers a novel rationale for countercyclical capital controls, distinct from conventional theories that stipulate controls be employed during expansions to regulate capital inflows. The optimal policy is characterized and empirical implications are discussed.