Born Out of Necessity: A Debt Standstill for COVID-19

Center for Economic Policy Research; Policy Insight No. 103 (2020)

11 Pages Posted: 28 Apr 2020 Last revised: 13 May 2020

See all articles by Patrick Bolton

Patrick Bolton

Columbia Business School - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Lee C. Buchheit

Center for Contract and Economic Organization

Pierre-Olivier Gourinchas

University of California, Berkeley - Department of Economics; University of California, Berkeley - Economic Analysis & Policy Group; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

G. Mitu Gulati

Duke University School of Law

Chang-Tai Hsieh

University of Chicago - Booth School of Business; University of California, Berkeley - Department of Economics; National Bureau of Economic Research (NBER)

Ugo Panizza

United Nations - Conference on Trade and Development (UNCTAD)

Beatrice Weder di Mauro

Graduate Institute Geneva, IHEID

Date Written: April 27, 2020

Abstract

The global downturn caused by the Covid-19 pandemic has the potential to send more than half the nations around the globe into debt distress in the near future. As of this writing, nearly a hundred countries have approached the IMF for assistance. Many, perhaps most, of these countries will need to move scarce resources away from debt service and towards battling the novel coronavirus. In response, the G20 has called for a temporary standstill on bilateral official debt sector debt owed by 72 of the poorest nations. To be effective (and to be fair), however, this temporary debt relief provided by bilateral creditors must be complemented by an equivalent effort from private sector lenders. Our policy paper argues that a comprehensive suspension of debt obligations is justified on the grounds of necessity and lays out a simple mechanism by which the private sector participation can be implemented immediately.

Keywords: debt standstill, COVID-19, sovereign debt

JEL Classification: G15, H12, H63, H74, H87, K22, K23

Suggested Citation

Bolton, Patrick and Buchheit, Lee C. and Gourinchas, Pierre-Olivier and Gulati, Gaurang Mitu and Hsieh, Chang-Tai and Panizza, Ugo and Weder di Mauro, Beatrice, Born Out of Necessity: A Debt Standstill for COVID-19 (April 27, 2020). Center for Economic Policy Research; Policy Insight No. 103 (2020), Available at SSRN: https://ssrn.com/abstract=3586785

Patrick Bolton (Contact Author)

Columbia Business School - Department of Economics ( email )

420 West 118th Street
New York, NY 10027
United States

HOME PAGE: http://www0.gsb.columbia.edu/faculty/pbolton/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Lee C. Buchheit

Center for Contract and Economic Organization ( email )

New York, NY

Pierre-Olivier Gourinchas

University of California, Berkeley - Department of Economics ( email )

549 Evans Hall #3880
Berkeley, CA 94720-3880
United States

HOME PAGE: http://sites.google.com/view/pgourinchas

University of California, Berkeley - Economic Analysis & Policy Group ( email )

Berkeley, CA 94720
United States

HOME PAGE: http://sites.google.com/view/pgourinchas

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

HOME PAGE: http://www.nber.org/people/pierre-olivier_gourinchas

Centre for Economic Policy Research (CEPR)

London
United Kingdom

HOME PAGE: http://cepr.org/active/publications/discussion_papers/authorlist.php?ident=136737

Gaurang Mitu Gulati

Duke University School of Law ( email )

210 Science Drive
Box 90362
Durham, NC 27708
United States

Chang-Tai Hsieh

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

University of California, Berkeley - Department of Economics ( email )

549 Evans Hall #3880
Berkeley, CA 94720-3880
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Ugo Panizza

United Nations - Conference on Trade and Development (UNCTAD) ( email )

Palais des Nations
Geneva, 1211
United States

Beatrice Weder di Mauro

Graduate Institute Geneva, IHEID ( email )

Geneva Avenue de la Paix 11A
Geneva, 1202
Switzerland
1211 (Fax)

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