The Future of Sovereign Debt Restructuring


 Everyone is anxious about the Spring Meeting of the International Monetary Fund, wherein the poor performance of restructuring of public debt is expected to be addressed. The international financial regulators have failed to address sovereign debt restructuring effectively. The Covid pandemic and its relief spending, rising inflation in the West, and the Russia-Ukraine war are the reasons for increasing interest rates. China as a creditor is problematic because it is not part of the Paris Club of Credits which works on bailing out distressed debtors. In addition, China's Development Banks lend on private commercial lending terms and have a superiority in repayment over government lending. Moreover, it prefers the rollover of debts rather than canceling debts, and it disagrees with the super-senior position of the IMF and World Bank. Such reasons make China as a creditor unacceptable. Considering these problems, India has prioritized addressing the sovereign debt restructuring issue during her G20 presidency and an effective solution to the problem would be a watershed moment of the presidency.


Business Standard 19042023

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