Strengthening the Contractual Framework for Sovereign Debt Restructuring - The IMF's Perspective

Abstract

This article discusses the impetus for, key features of, and recent experience in implementing reforms to international sovereign debt contracts. Recognizing the vulnerabilities in the existing contractual framework for sovereign debt restructuring, the IMF in 2014 endorsed reforms to collective action and pari passu clauses in international sovereign bonds designed to limit the scope for holdout creditors to undermine a restructuring. Progress in incorporating the enhanced clauses in international sovereign bonds has been rapid – with the majority of issuances now including these clauses. However, a substantial stock of outstanding bonds remains without these provisions. The IMF will continue to engage actively with its membership and the markets to further promote the inclusion of the enhanced clauses in new issuances and, where feasible, accelerate the turnover of legacy bonds.

Keywords: Sovereign Debt, Restructuring, International Finance, IMF, Global Financial Crisis

JEL Classification: F3, G15, K33