In September 2014, the UN General Assembly passed Resolution 63/304, which expressed the will of many member states to move toward the development of a multilateral framework for sovereign debt restructuring. Through this improved contractual language and International Monetary Fund (IMF) process reforms, the international community made advances to reduce the costs of sovereign debt restructuring for debtors and creditors. Little, however, has been done to reduce the inhibitions debtor countries face in dealing proactively with creditors to prevent and treat sovereign debt distress. To help address this reform lacuna, this policy brief suggests implementation of a Sovereign Debt Forum, revisions to the terms of the IMF’s Flexible Credit Line, and improvement to borrow and lender codes of conduct. The brief concludes that additional practical reforms could be undertaken to provide distressed sovereigns with more breathing room to address their problems and make restructuring terms stick once they have been agreed.
