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Recent episodes of sovereign debt restructurings. A case-study approach

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Author Info

  • Javier Díaz-Cassou

    ()
    (Banco de España)

  • Aitor Erce-Domínguez

    ()
    (Banco de España)

  • Juan J. Vázquez-Zamora

    ()
    (Banco de España)

Abstract

Sovereign debt restructurings do constitute a recurrent phenomenon in emerging and developing economies. Consequently, the international community has repeatedly explored options to increase the predictability and orderliness of debt workouts, of which the debate on the Sovereign Debt Restructuring Mechanism (SDRM) proposed by the IMF in 2002 is the most recent example. Eventually, however, the most ambitious reform proposals have been systematically abandoned, thereby consolidating debt restructurings as market-led case-by-case processes. This paper reviews nine recent sovereign debt restructurings: Argentina (2001-2005), Belize (2006-2007), the Dominican Republic (2004-2005), Ecuador (1999-2000), Pakistan (1998-2001), the Russian Federation (1998-2001), Serbia (2000-2004), Ukraine (1998-2000) and Uruguay (2004). Our case study analysis reveals the lack of a single model for sovereign debt restructurings. Indeed, we find significant variations in the roots of the crises, the size of the losses undergone by investors, the speed at which an agreement was reached with creditors, the proportion of creditors accepting the terms of that agreement, or the time needed to restore access to international financial markets. There also appears to be a lack of consistency in the role played by the IMF in the various crises. This is partly due to the lack of a policy specifically designed to deal with sovereign debt restructurings in the IMF's toolkit, which has provided the IMF with flexibility to adapt to each crisis on a case-by-case basis. However, it may have exacerbated the uncertainty that tends to characterize such disruptive episodes. This paper constitutes the basis of a broader effort to identify possible options for the IMF to endow itself with a policy to streamline and systematize its role during sovereign debt restructurings.

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File URL: http://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosOcasionales/08/Fic/do0804e.pdf
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Bibliographic Info

Paper provided by Banco de Espa�a in its series Banco de Espa�a Occasional Papers with number 0804.

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Length: 82 pages
Date of creation: Aug 2008
Date of revision:
Handle: RePEc:bde:opaper:0804

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Keywords: IMF; sovereign debt; restructurings; default; solvency;

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References

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  1. Federico Sturzenegger & Jeromin Zettelmeyer, 2007. "Creditors' Losses Versus Debt Relief: Results from a Decade of Sovereign Debt Crises," Journal of the European Economic Association, MIT Press, vol. 5(2-3), pages 343-351, 04-05.
  2. Eichengreen, B. & Portes, R., 1989. "Dealing with Debt: The 1930's and the 1980's," DELTA Working Papers 89-04, DELTA (Ecole normale supérieure).
  3. Abbigail J. Chiodo & Michael T. Owyang, 2002. "A case study of a currency crisis: the Russian default of 1998," Review, Federal Reserve Bank of St. Louis, issue Nov, pages 7-18.
  4. Bjoern Rother & Ivetta Hakobyan & Monica Baumgarten de Bolle, 2006. "The Level and Composition of Public Sector Debt in Emerging Market Crises," IMF Working Papers 06/186, International Monetary Fund.
  5. Javier Díaz-Cassou & Aitor Erce-Domínguez & Juan J. Vázquez-Zamora, 2008. "The role of the IMF in recent sovereign debt restructurings: Implications for the policy of lending into arrears," Banco de Espa�a Occasional Papers 0805, Banco de Espa�a.
  6. Carmen M. Reinhart & Kenneth S. Rogoff & Miguel A. Savastano, 2003. "Debt Intolerance," NBER Working Papers 9908, National Bureau of Economic Research, Inc.
    • Reinhart, Carmen & Rogoff, Kenneth & Savastano, Miguel, 2003. "Debt intolerance," MPRA Paper 13932, University Library of Munich, Germany.
  7. Niko Gobbin & Bruno Merlevede, 2000. "The Russian Crisis: A Debt Perspective," Post-Communist Economies, Taylor & Francis Journals, vol. 12(2), pages 141-163.
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Cited by:
  1. Javier Díaz-Cassou & Aitor Erce-Domínguez & Juan J. Vázquez-Zamora, 2008. "The role of the IMF in recent sovereign debt restructurings: Implications for the policy of lending into arrears," Banco de Espa�a Occasional Papers 0805, Banco de Espa�a.
  2. Michael Tomz & Mark L. J. Wright, 2012. "Empirical research on sovereign debt and default," Working Paper Series WP-2012-06, Federal Reserve Bank of Chicago.
  3. Juan J. Cruces & Christoph Trebesch, 2013. "Sovereign Defaults: The Price of Haircuts," American Economic Journal: Macroeconomics, American Economic Association, vol. 5(3), pages 85-117, July.
  4. Hatchondo, Juan Carlos & Martinez, Leonardo & Sosa Padilla, César, 2014. "Voluntary sovereign debt exchanges," Journal of Monetary Economics, Elsevier, vol. 61(C), pages 32-50.
  5. Christoph Trebesch, 2009. "The Cost of Aggressive Sovereign Debt Policies," IMF Working Papers 09/29, International Monetary Fund.
  6. Aitor Erce, 2013. "Sovereign debt restructurings and the IMF: implications for future official interventions," Globalization and Monetary Policy Institute Working Paper 143, Federal Reserve Bank of Dallas.

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