This is the first complete dataset of sovereign restructuring cases, covering the six decades from 19502010. A set of clearly defined ex ante criteria, analogous to those used in the hipc initiative. Managing chinaimf cooperation across the belt and road by dylan gerstel. Imf due in argentina for debt restructuring talks money.
It achieved very large debt relief over 50 percent of 2012 gdpwith minimal financial disruption, using a combination of new legal techniques, excep. Exploring ways to improve the sovereign debt restructuring process is a key part of the international communitys efforts to strengthen the architecture of the global financial system. Krueger a new approach to sovereign debt restructuring international monetary fund washington, d. Buenos aires, feb 12 delegates from the international monetary fund were to arrive in argentina today to begin talks on restructuring the recessionhit south american countrys crippling foreign debt. Issues and problems 391 1 1 22 0 cr e d pr e fy dy thus, the rational expectations e is a fixpoint of the mapping that transr forms a postulated interest rate into an arbitraged yield, passing through the. Public debt restructuring and banking james roaf sovereign asset and liability management division monetary and capital markets department, imf world bankimffederal reserve system seminar for senior bank supervisors from emerging markets washington dc, october 18, 2007. A new approach to sovereign debt restructuring imf. Literature survey, data, and stylized facts udaibir s. In recent years there has been extensive discussion inside and outside the imf on the need to develop a new approach to sovereign debt restructuring. Assessingtheappropriatesizeof reliefinsovereign debt. The views expressed in this working paper are those of the authors and do not necessarily represent those of the imf or imf policy. Restoring a countrys debt to a sustainable path after a sovereign debt restructuring is key to ensuring a credible and durable exit from the crisis.
We then show that imf projections for assessing debt sustainability have been repeatedly biased, which. We find that there are bad and good or not so bad debt restructurings for growth. The debt restructuring has helped to set barbados public debt on a clear downward trajectory. Where claims are held by official bilateral creditors, the approach may vary. In recent years, a number of countries have restructured their sovereign liabilities, either following a default, or preemptively, to avoid a default. Staff discussion notes showcase the latest policyrelated analysis and research being developed by individual imf staff and are published to elicit comment and to further debate. Ibon international has released a new policy brief, imfs debt restructuring follies, which analyzes the policy failures and blunders of the international monetary fund imf in holding on to its marketbased approach to settling sovereign debt. In the report for that board discussion staff provided an update of developments in a number of sovereign debt restructuring cases, described progress in the inclusion of collective action clauses. Dealing with sovereign debtthe imf perspective imf blog. A new approach to sovereign debt restructuring imf elibrary. In contrast to the imf, debt restructuring practices have not improved over time despite attempts at collective action to revise current arrangements. Wp16204 benefits and costs of corporate debt restructuring.
The imf should respect democratic ownership and stop applying conditions to loans other than the repayment of the loan on the terms agreed. International monetary fund, 2010, resolution of crossborder banksa proposed framework for enhanced coordination. In this respect, the imf should extend the use of instruments such as the flexible. Periods when debt togdp ratios rose explosively as a result of wars, depressions and financial crises also have a long history. Domenico lombardi2 abstract this paper provides a methodology for assessing the appropriate size of debt relief in sovereign debt restructuring initiatives, with the baseline premise being that a restructuring must be principles based. The restructuring was comprehensive, featuring several rarely used approaches, including the restructuring of treasury bills, and the use of a retrofitted collective action mechanism. We analyze a distressed firm indebted to many creditors.
Government involvement in corporate debt restructuring. Imf to establish a 110 billion greek loan facility eu 80bn, imf 30bn required that. Imfs debt restructuring follies ibon international. The imfs lending framework and sovereign debt restructuring. The firms owners have the option of choosing the sequence of restructuring negotiations with the creditors. The two restructurings provided liquidity relief, with the second one involving a principal haircut. It argues that corporate debt restructuring is an important step toward recovery from a financial crisis. Pdf 778 kb epub 814 kb mobi 164 kb from bailout to bailin. Sovereign debt restructurings are associated with declines in gdp. 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. 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. Yet we lack a full understanding of how and why it operates as it does, and in particular of the political forces that affect it. The subject of this paper is the agreement reached on july 23, 1989 which offered commercial creditors the choice to exchange old debt instruments for new instruments involving debt relief, but partially secured with collateral.
In order to provide food for thought regarding these issues and, more in general, the role of the imf in sovereign debt restructurings we carry out a comprehensive analysis of 12 recent sovereign. Both restructurings emerged as a consequence of weak fiscal and debt situations, whichbecame unsustainable soon after external shocks hit the island economy. This paper examines the causes, processes, and outcomes of barbados 201819 sovereign debt restructuring its first ever. This paper studies the role played by the imf during sovereign debt restructurings. This webonly series replaced staff position notes in january 2011. The international monetary fund in the global economy by. The international monetary fund imf is one of the worlds most important economic institutions, especially in times of crisis. Many of these episodes resulted in debt management problems resolved through debasements and restructurings. An incremental approach to sovereign debt restructuring. This paper documents the two debt restructurings that grenada undertook in 200406 and 2015. This working paper should not be reported as representing the views of the imf. Sovereign debt restructuring and the imf email notification signup sign up to receive free email notices when new series andor country items are posted on the imf website. Pdf governing sovereign debt restructuring through regulatory. Barbados 201819 sovereign debt restructuringa sea change.
Mexicos external debt restructuring in 198990 english. With respect to the debt restructuring for a single bank and its branches. Fund, which would combine imf lending with debt restructuring. Legal frameworks and general principles for indicators in. Risk management optimization for sovereign debt restructuring. Aitor erce senior researcher at the european stability mechanism. This occasional paper takes stock of the experiences of some of these countriesargentina, the. The imf has been improving in terms of providing adequate lending facilities and focusing conditionality on macrorelevant areas. Use the free adobe acrobat reader to view this pdf file disclaimer. Five years ago, chinese president xi jinping announced his flagship foreign policy project, the belt and road initiative bri. This pamphlet by imf first deputy managing director anne o. There is a growing co nsensus that the present process for restructuring the debts of a sovereign. Sovereign debt sustainability as a principle of public international law. These papers are generally brief and written in nontechnical language, and so are aimed at a broad audience interested in economic policy issues.
Restructuring sovereign debt barry eichengreen barry. Benefits and costs of corporate debt restructuring. The euro area crisis precipitated large imf loans, cofinanced by euro area governments. April 26, 20 sovereign debt restructuringrecent developments and implications for the funds legal and policy. Definition of outofcourt debt restructuring outofcourt debt restructuring. We consider public debt from a longterm historical perspective, showing how the purposes for which governments borrow have evolved over time. For a countrys creditors, a debt restructuring results in an upfront loss in their. The imf has generally met its countercyclical lending objectives. An estimation for korea by jae chung and lev ratnovski imf working papers describe research in progress by the authors and are published to elicit comments and to encourage debate.