This paper discusses “debt reprofiling” — a relatively light form of sovereign debt restructuring in which the tenor of a government’s liabilities are extended in maturity, but coupons and principal are not cut — and how to distinguish one from deeper forms of debt restructuring. The International Monetary Fund has proposed making reprofiling the centrepiece of the proposed rewrite of its exceptional access policy that governs fund lending and debt restructuring conditionality when a member country seeks to borrow large sums. This policy would distinguish when creditors should suffer immediate losses (through a loss-inducing debt restructuring) from situations where creditors are simply required to remain in the game as a lender (through a reprofiling) and at risk to loss in future restructurings. Ukraine’s current situation is studied, where the government’s finances have been destabilized by the ongoing geopolitical conflict. The paper’s framework is used to argue that a reprofiling could have been a valuable tool during 2014 in the Fund’s initial financing for Ukraine — short-term creditors could have been prevented from exiting the system.
