Redesigning Sovereign Debt Restructuring Mechanisms

Posted: 18 Aug 2006

See all articles by Mihir A. Desai

Mihir A. Desai

Harvard Business School - Finance Unit; National Bureau of Economic Research (NBER)

Date Written: 2006


How should the debt of sovereign countries be restructured when countries approach default? Anne O. Krueger of the International Monetary Fund (IMF) is proposing a new approach to sovereign defaults: the Sovereign Debt Restructuring Mechanism (SDRM). The SDRM would create a new international legal framework for sovereign defaults, similar to bankruptcy proceedings in the private sector. A new judicial group within the IMF would oversee the SDRM, and it would be implemented through international treaties. Krueger has to construct a convincing case that the SDRM would be more effective than alternative approaches to sovereign defaults. The case provides information on some major sovereign defaults (the crises in Latin America, Mexico, and Asia) and on the existing institutions and processes that creditors and debtors turn to in sovereign defaults. Students must weigh the advantages and disadvantages of different approaches to sovereign defaults.

Suggested Citation

Desai, Mihir A., Redesigning Sovereign Debt Restructuring Mechanisms (2006). HBS Publishing Case No.: 9-204-110 Teaching Note No.: 5-206-096, Available at SSRN:

Mihir A. Desai (Contact Author)

Harvard Business School - Finance Unit ( email )

Boston, MA 02163
United States
617-495-6693 (Phone)
617-496-6592 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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