The New Approach to Sovereign Debt Restructuring: Setting the Incentives Right

March 1, 2002

Preview Citation

Format: Chicago

Carlo A Sdralevich, and Biaggio Bossone. The New Approach to Sovereign Debt Restructuring: Setting the Incentives Right, (USA: International Monetary Fund, 2002) accessed November 21, 2024

Disclaimer: This Policy Dicussion Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

The paper discusses key incentive-related issues of the sovereign debt restructuring mechanism recently outlined by the IMF First Deputy Managing Director. The structure of incentives in the mechanism should be consistent with the principle of favoring market-oriented, voluntary solutions to financial crises. The paper frames the mechanism in the context of involving the private sector in financial crisis resolution (PSI), and identifies the conditions for setting up an appropriate incentive structure. The paper explores issues relating to the functioning of the mechanism, including access policy on IMF resources; the power to activate the mechanism; its relation with intermediate PSI instruments; and its impact on investment in emerging markets.

Subject: Asset and liability management, Debt restructuring, Debt sustainability analysis, External debt, Financial crises, Financial sector policy and analysis, Moral hazard, Sovereign debt restructuring, Tax incentives

Keywords: Cost structure, Crisis resolution, Debt default, Debt restructuring, Debt sustainability analysis, Incentive structure, Moral hazard, PDP, Private sector involvement, SDRM failure, SDRM framework, SDRM payoff structure, SDRM phase, Sovereign debt, Sovereign debt restructuring

Publication Details

Pages:

27
Volume:

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DOI:

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Issue:

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Series:

Policy Discussion Paper No. 2002/004
Stock No:

PPIEA0042002
ISBN:

9781451973594
ISSN:

1564-5193

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