A discourse theoretical approach to sovereign debt. Proposed features of a sovereign debt restructuring mechanism. Belizes 201617 sovereign debt restructuring third time. Use the free adobe acrobat reader to view this pdf file disclaimer. Debt restructuring is a method used by companies to alter the terms of debt agreements in order to achieve some advantage with outstanding debt obligations. Use the free adobe acrobat reader to view this pdf file. This working paper should not be reported as representing the views of the imf. This years imfworld bank spring meeting is likely to include discussion of proposals to change the funds policy on sovereign debt restructuring. A longawaited overview paper on sovereign debt restructuring from the international monetary fund imf is here, the first since 2005. It describes the role of the imf in the process, with a fundsupported program approved by the. The following is an extract from the barbados 201819 sovereign debt restructuringa sea change. Investors accepting or being forced to accept through the use of. Sometimes debts are rendered unsustainable for reasons beyond the control of the borrower. The debt restructuring has helped to set barbados public debt on a clear downward trajectory.
The imf approach to sovereign debt restructuring ft. Sovereign debt restructuring recent developments and implications for the funds legal and policy framework. The form of the debt restructuring was an exchange of old ggbs for new ggbs. The restructuring was comprehensive, featuring several. Imf on barbados 201819 sovereign debt restructuring. Debt restructuring mechanism sdrm in the early 2000s, the international monetary fund imf is again seeking to engage various stakeholders in a new round of discussions about improving sovereign debt. Chapter iii analyzes the debt pro file, liquidity position. Imf would share in the debt burden to the imf itself. The international monetary fund imf has taken a radical new approach in debt restructuring to lessen the pain of austerity and is developing plans that impose initial losses on bondholders of. The sovereign debt restructuring process international. This significant weakness in the global financial architecture is of critical concern to many caribbean small states caught in a high debt low. Imf lending practices and sovereign debt restructuring james boughton, skylar brooks and domenico lombardi introduction the imf has struggled for decades to develop a set of lending practices that enable sovereign borrowers to resolve serious debt problems and restore economic growth, but also respect the right of private financial markets to enter.
The imf revisits sovereign debt restructuring, not the. Ipd task force on sovereign debt council on foreign. A mechanism to regulate sovereign debt restructuring in the euro area 2 german council of economic experts sustainable public debt, if needed by initiating a deeper debt restructuring including debt. A mechanism to regulate sovereign debt restructuring in. The imf is rarely energetic in overseeing debt restructuring deals, often simply. April 26, 20 sovereign debt restructuringrecent developments and implications for the funds. In the debt restructuring with private sector creditors in 2004 06, the imf played its role as an independent party to provide a debt sustainability assessment and cash flow analysis.
It is a prerequisite for external viability and therefore for the success of the program and. Imf board holds informal seminar on sovereign debt. Restructuring sovereign debt barry eichengreen barry. Debtrestructuring the process of renegotiating debt repayments, and sometimes reducing debt amountscan therefore be an important tool to address more deeply entrenched problems with a. This paper examines the causes, processes, and outcomes of barbados 201819 sovereign debt restructuringits first ever. Barbados 201819 sovereign debt restructuringa sea change. Imfs executive board four months into the process, on october 1. We find that there are bad and good or not so bad debt restructurings for growth. Dsa hence plays a role in the decision whether a debt restructuring will take place whether in the context of an imfsupported. The views expressed in imf working papers are those of the authors and do not necessarily represent the views of the imf, its executive board, or imf management.
Corporate debt restructuring imf staff position note spn. The international monetary fund congressional research service summary the international monetary fund imf, conceived at the bretton woods conference in july 1944, is the multilateral organization. While growth generally declines in the aftermath of a sovereign debt restructuring, agreements that allow countries to exit a default spell final restructurings are associated with improving growth. We assess the benefits of debt restructuring by estimating the effects of. How the imf did itsovereign debt restructuring between. Between 1982 and 1989, the international monetary fund imf acted as a thirdparty in a total of 109 debt restructurings between 41 debtor states and their creditor banks. Debt restructuring is a process that allows a private or public company or a sovereign entity facing cash flow problems and financial distress to reduce and renegotiate its delinquent debts to improve or. Where the debts being restructured are claims held by the. Imf working papers describe research in progress by the authors and are published to elicit comments and to encourage debate. Imf have been considering in recent months how to fill this gap, helped by suggestions from academics, the private creditor commu. As was the case in the earlier two restructurings, in 200607 and in 2012, the 201617 debt restructuring was executed through collaborative engagement with creditors outside an imf. Club bilateral outstanding debt representing imf debt minus gulf state debt the imf does not break out by country. In 2001, then international monetary fund imf deputy managing director anne krueger described the absence of an international mechanism for restructuring sovereign debt as a gaping hole in the. The report looks at economic developments and prospects among the worlds lowincome countries, which account for a fifth of the worlds population but only four percent of global output.
The greek debt restructuring of 2012 stands out in the history of sovereign defaults. As was the case in the earlier two restructurings, in 200607 and in 2012, the 201617 debt restructuring was executed through collaborative engagement with creditors outside an imfsupported program. The imf takes little care to provide a standstill on debt servicing, letting countries be destabilized by prebankruptcy debt claims. The dayton accords required bosnia to assume its share of this debt. Sovereign debt restructuring and debt sustainability. Dealing with sovereign debtthe imf perspective imf blog. The restructuring was comprehensive, featuring several rarely used approaches, including the restructuring of treasury bills, and the use of a retrofitted collective action mechanism. The imfs 2002 proposal for a new sovereign debt restructuring mechanism sdrm attracted considerable criticism from both emerging market sovereign debt issuers and from private. This paper examines the causes, processes, and outcomes of belizes 201617 sovereign debt restructuringits third episode in last 10 years. In a new report, the committee on international economic policy and reform examine sovereign debt crises and present procedures for restructuring the debt of bankrupt sovereigns at the. Lending into arrears, moral hazard and sustainability concerns. Government debt in some of the worlds poorest countries is rising to risky levels, a new imf report shows. Sovereign debt sustainability as a principle of public international law.
Sovereign debt restructurings and the domestic economyexperience in four recent cases, sm0267 22102. When debt is judged to be unsustainable, there are various ways in which the necessary debt relief can be delivered. There have been three incidences of sovereign debt restructuring involving private creditors under imfsupported programs since 2015. This paper studies the effect of sovereign debt restructurings with. There had not been any discussions at the imf about sovereign debt restructuring since 2005, and it had been more than ten years since anne kruegers.
Lending into arrears, moral hazard and sustainability concerns iii preface the g24 discussion paper series is a collection of research papers prepared. Benefits and costs of corporate debt restructuring. The international monetary fund imf is an international organization headquartered in washington, d. Debt sustainability is a key requirement for fund lending. International monetary fund 700 19th street, nw washington, d. Risk management optimization for sovereign debt restructuring. It achieved very large debt relief over 50% of 2012 gdp with minimal financial disruption, using a. Sovereign debt restructuringrecent developments and. Skylar brooks skylar brooks is a research associate in cigis global economy program. Use the free adobe acrobat reader to view the full text of 240kb pdf file.
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