Strengthening the Framework for Sovereign Debt Restructuring

Project Expert

Robert Kahn

Steven A. Tananbaum Senior Fellow for International Economics

About the Project

The difficulties associated with the Greek debt crisis and Argentina's ongoing legal standoff with holdout creditors has renewed calls to rethink policy for sovereign debt crises. Reformists have called for new statutory bodies that could resolve sovereign bankruptcies and rules to change the terms and conditions of IMF lending. But reformists have the case wrong. Sovereign debt markets largely work well, and the current official strategy—which emphasizes debtors negotiating market-based restructurings with IMF support—has proven effective at allowing most countries to exit crisis when facing distress. More could be done to improve the contracts on existing debt. But my larger concern is that creditor governments and the IMF are too slow to act, unwilling to address a persistent debt overhang in the eurozone, and adopting unrealistic assumptions about debt sustainability in Ukraine. I examine this issue on my blog and in my July 2013 monthly report "Lessons Learned from Greece". I am also writing several articles and a book on the history of sovereign debt crises and prospects for meaningful reform.