Avoiding a Lost Decade--An Interim Update

9 Pages Posted: 14 Feb 2023 Last revised: 15 Feb 2023

See all articles by Lee C. Buchheit

Lee C. Buchheit

Center for Contract and Economic Organization

Mitu Gulati

University of Virginia School of Law

Date Written: February 11, 2023

Abstract

All sovereign debt restructurings are inherently messy, expensive, exasperating, time-consuming and contentious. These are the familiar pathologies in the international system to resolve unsustainable sovereign debts. But the period since the onset of the Covid-19 crisis has revealed (to use a term we all learned during pandemic lockdowns) several new co-morbidities. These include a breakdown in the ability of the major external creditor groups (traditional Paris Club lenders, non-Paris Club bilateral creditors like China and bondholders) to coordinate their debt relief efforts, the increasingly diverse nature of the private sector entities holding claims against a debtor state and the total absence of any mechanisms — statutory or contractual — that can be used to ensure that the sacrifices made by the vast majority of claimants and official sector sponsors in the economic recovery process cannot be exploited by the uncooperative few.

Keywords: Sovereign Debt, Restructurings, China, Covid-19, Paris Club, Common Framework

JEL Classification: G15, K12, F33, F34

Suggested Citation

Buchheit, Lee C. and Gulati, Mitu, Avoiding a Lost Decade--An Interim Update (February 11, 2023). Oxford Review of Economic Policy (forthcoming 2023), Virginia Public Law and Legal Theory Research Paper No. 2023-15, Virginia Law and Economics Research Paper No. 2023-06, Available at SSRN: https://ssrn.com/abstract=4354901

Lee C. Buchheit

Center for Contract and Economic Organization ( email )

New York, NY

Mitu Gulati (Contact Author)

University of Virginia School of Law ( email )

580 Massie Road
Charlottesville, VA 22903
United States

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