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Sovereign Debt Restructuring Mechanisms: Trends, Tools, and Global Case Studies

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  • Hantsiak, Mykhailo

Abstract

In Ukraine, the debt crisis has intensified, manifested in the growth of public liabilities, an expanding budget deficit, and increasing pressure on public finances. Limited domestic funding sources compel the state to actively borrow on the debt market, exceeding safe limits and heightening insolvency risks. Under these conditions, debt restructuring emerges as a key tool to prevent financial destabilization. Global experience provides insights into effective mechanisms that can be adapted to Ukraine’s realities to restore debt sustainability. The purpose of the study is to outline the key principles for implementing sovereign debt restructuring mechanisms, with a focus on global experience, to develop recommendations for their successful application in Ukraine. The study is based on official statistical data from Ukraine and international financial institutions, scientific publications, analytical reports, and examples of global debt restructuring cases. Methods of analysis and synthesis, comparative and statistical analysis, graphical methods, and the case study approach were employed to identify trends and assess the effectiveness of debt mechanisms. The necessity of restructuring as a key tool for stabilizing public finances has been substantiated. The effectiveness of restructuring mechanisms has been shown to depend on the depth of changes to debt conditions and coordination with creditors. Emphasis has been placed on the role of comprehensive reforms and fiscal consolidation. A comparison of global cases of successful and unsuccessful restructurings has been conducted. The main tools and approaches to their implementation have been systematized. The conclusion has been drawn on the advisability of adapting the best international practices to Ukraine’s conditions. Sovereign debt restructuring is a crucial tool for reducing debt burden and restoring financial stability, but its effectiveness depends on a comprehensive approach, coordination with creditors, and accompanying economic reforms. Global experience highlights the advisability of combining various mechanisms and implementing innovative tools. For Ukraine, the key lies in adapting the best international practices to national conditions and maintaining systematic dialogue with creditors to enhance debt sustainability.

Suggested Citation

  • Hantsiak, Mykhailo, 2025. "Sovereign Debt Restructuring Mechanisms: Trends, Tools, and Global Case Studies," MPRA Paper 127547, University Library of Munich, Germany, revised 11 Sep 2025.
    • Handle: RePEc:pra:mprapa:127547
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    References listed on IDEAS

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    1. Law, Siong Hook & Ng, Chee Hung & Kutan, Ali M. & Law, Zhi Kei, 2021. "Public debt and economic growth in developing countries: Nonlinearity and threshold analysis," Economic Modelling, Elsevier, vol. 98(C), pages 26-40.
    2. Checherita-Westphal, Cristina & Rother, Philipp, 2012. "The impact of high government debt on economic growth and its channels: An empirical investigation for the euro area," European Economic Review, Elsevier, vol. 56(7), pages 1392-1405.
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    Keywords

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    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • F30 - International Economics - - International Finance - - - General
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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