This chapter is concerned with the issue of how to balance bailouts (or ‘lending into arrears’) with debt reductions (or ‘private sector involvement’) in the resolution of sovereign debt crises.
The great surprise of the debate over the sovereign debt restructuring mechanism (SDRM) was not that the proposal of the International Monetary Fund (IMF) for international legal protection for bankrupt sovereigns failed, it was that the IMF was able to find the political space needed to put forward a proposal that generated a serious public debate on the need for sovereign bankruptcy. This paper delves into the reasons for the SDRM’s failure.
This paper examines the emerging market bonds from the early 1990s to mid 2000s to better understand how risk is shared between a debtor and its creditors under the current international process for sovereign bankruptcy. Two distinct, but related, questions are asked: how much have creditors have been able to recover on their investments in the case of restructurings, and, more broadly, whether the emerging bond market has paid investors an excess return over time.
This paper intends to give an overview of proposals which have been presented for more orderly sovereign debt workouts. It presents a set of criteria on which to judge the individual proposals’ strengths and weaknesses. Finally it takes stock of the international debt management reform process and suggests some practical steps in order to move it forward.
One of the lessons of the emerging market crises of the late 1990s and the early years of the new century is that the global system can, and should, be better prepared to deal with undesired consequences of business cycle downswings and economic shocks, one of which can be a government debt crisis.
This case study looks at how Ethiopia has fundamentally changed the basis of its debt relief and new official development financing in recent years.
This paper is the conclusion to the book Overcoming Developing Country Debt Crises, edited by Barry Herman, Jose Antonio Ocampo and Shari Spiegel. The argument in this book is that the ad hoc and piecemeal official and market-based insolvency regimes for sovereign debtors have been excessively creditor friendly and costly for developing countries.
This paper’s focus is on the evolution of Russian debt since the breakup of the Soviet Union, the events leading to the debt crisis of 1998, its resolution, and how Russia rose to be a “star performer” among sovereign debtors.
This paper describes the unique way negotiations within the Paris Club are carried out, with the debtor in essence as supplicant to the creditors who then announce their joint decision on relief, after which the debtor undertakes a series of bilateral renegotiations of each loan with each creditor following the guidelines of the Club’s ‘Agreed Minute’.