The World Needs a Sovereign Debt Bankruptcy Process

Wednesday, April 15, 2015 2:00 PM

CIGI Senior Fellow Richard Gitlin will chair a discussion at the IMF Spring Civil Society Policy Forum on the need for a sovereign debt bankruptcy process. CIGI has partnered with New Rules for Global Finance to host this event.

Sovereign debt crises are not new, but they have become increasingly difficult to resolve in the last two decades. The global sovereign bond market is worth more than $21 trillion – and has already caused havoc for several large economies. There are also broad implications – from pension funds (and their pensioners) to financing the post-2015 sustainable development goals. As more countries gain access to private debt markets – using it to finance economic development – a predictable process to resolve debt problems will be essential. This session will debate: What kind of predictable process is necessary? There are two major camps: 1) market-based process (i.e. contractual approach) and 2) bankruptcy/institutional process (i.e. statutory approach). Supporters of the market-based process assert that better contracts between creditors and borrowers can resolve the current deficiencies with debt workouts. Supporters of a bankruptcy process assert that better contracts are insufficient and that an institutional process is necessary to resolve sovereign debt problems appropriately. 

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