Scale and Scope of Sovereign Debt Restructuring: A Practitioner's Guide

Sovereign debt restructurings have become common tools for reducing indebted countries' debt burden and achieving debt sustainability. This is often necessary to free up budgetary resources to be spent on social priorities and to reduce the cost of credit available to the private sector. However, as common as sovereign debt restructurings have become, they are multifaceted undertakings, with several (groups of) stakeholders, that often take years to complete and put economic activity in the debtor country effectively on hold. Recent shifts in the composition of debt toward external bilateral and domestic debt in many low- and middle-income countries have made matters even more complicated.

The study group will discuss the main inputs used for the decision of whether or not to restructure sovereign debt and what specific types of debt to include in the restructuring perimeter. It will focus of concepts such as debt sustainability, fiscal savings from restructuring, economic costs of restructuring, financial stability implications of restructuring, and how these concepts should influence policymakers' decision to restructure or not to restructure.

Suggested reading:

International Monetary Fund, 2021. “Issues in Restructuring Sovereign Domestic Debt,” IMF Policy Paper, December.

Grigorian, David A., 2023. “Restructuring Domestic Sovereign Debt: An Analytical Illustration,” IMF Working Paper 23/24, February.

This study group / discussion is open to all HUID holders. Registration is not necessary.

M-RCBG welcomes individuals with disabilities to participate in its programs. To request accommodations or ask questions about access provided, please email: mrcbg@hks.harvard.edu