Avinash Persaud, 01 April 2021

The servicing and rolling over of the public and private debt of middle-income countries is a major point of COVID-19-induced stress in the global economy. The G20’s Debt Service Suspension Initiative is a worthy initiative, but it does not address this issue. This column outlines three related steps that may help avoid a crisis. The centre-piece is recycling new and unused Special Drawing Rights for debt reduction through the repayment or repurchase of debt. Moral hazard can be addressed by reducing only those debts held by official creditors and up to an amount equal to fiscal expenditures relating to natural disasters – COVID-19 and climate change, principal amongst them.  

Clemens Graf von Luckner, Josefin Meyer, Carmen Reinhart, Christoph Trebesch, 30 March 2021

Today, more than half of low-income countries eligible for relief under the Debt Service Suspension Initiative are either in debt distress or at high risk. Several emerging markets have either recently restructured (Argentina and Ecuador) or remain in default (Lebanon, Surinam, and Venezuela). In this context, this column reviews some of the features of external sovereign debt restructurings. It shows that default spells are lengthy and that the road to debt-crisis resolution is often littered with serial restructuring agreements.  

Patrick Bolton, Lee Buchheit , Pierre-Olivier Gourinchas, Mitu Gulati, Chang-Tai Hsieh, Ugo Panizza, Beatrice Weder di Mauro, 28 May 2020

The official sector has moved swiftly to assist the poorer countries most affected by the Covid-19 pandemic, under the banner of the Debt Service Suspension Initiative.  Will private sector creditors follow suit? The G20 "called upon" commercial creditors to provide comparable forbearance but did not mandate it. In response, the private sector has offered an impressive list of the reasons why a temporary deferral of payments to commercial creditors will be time-consuming, expensive and possibly very damaging to the debtor countries requesting it. This column discusses the challenges in attempting to coordinate wholly voluntary private sector debt relief for sovereigns afflicted by the pandemic.

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