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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Find related papers by JEL classification: E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes F34 - International Economics - - International Finance - - - International Lending and Debt Problems H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management
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Reinhart, Carmen & Rogoff, Kenneth & Savastano, Miguel, 2003.
"Debt intolerance,"
MPRA Paper
13932, University Library of Munich, Germany.
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Other versions:
Carmen M. Reinhart & Kenneth S. Rogoff & Miguel A. Savastano, 2003.
"Debt Intolerance,"
NBER Working Papers
9908, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted)
Carmen M. Reinhart & Kenneth S. Rogoff & Miguel A. Savastano, 2003.
"Debt Intolerance,"
Brookings Papers on Economic Activity,
Economic Studies Program, The Brookings Institution, vol. 34(2003-1), pages 1-74.
[Downloadable!]