This paper outlines the issues at the heart of sovereign debt restructuring and the main proposals for improving crisis prevention and management in this crucial area with the aim of facilitating the global consultations. The proposals include: increasing the role of debt reprofiling in certain circumstances; introducing state-contingent debt such as GDP-linked bonds; creating a Sovereign Debt Forum to facilitate debtor-creditor cooperation and preserve best practices; strengthening collective action clauses; immunizing payments systems from third-party interference; establishing a Sovereign Debt Adjustment Facility in the International Monetary Fund; and building a European Sovereign Debt Restructuring Mechanism. The proposals, as well as the underlying assessments they are based on, are the subject of serious debate and discussion among scholars, policy makers, civil society organizations and private market actors. In other words, this paper frames the broad parameters of the current debate over how best to govern sovereign debt restructuring. Understanding, engaging with and advancing this debate are the necessary first steps.
About the Authors
Domenico Lombardi is director of the Global Economy Program and a member of the executive management committee at the Centre for International Governance Innovation (CIGI). He also serves on the advisory boards of the Peterson Institute for International Economics and the Bretton Woods Committee in Washington, and is a member of the Steering Committee of the Asian Economic Panel.