Leading Experts Launch Initiative to Address Weaknesses in Sovereign Debt Restructuring
Published: April 05, 2021
On April 5, 2021, the Bretton Woods Committee launched its Sovereign Debt Working Group and is proud to release the Working Group’s first publication, titled Sovereign Debt: A Critical Challenge. This introductory paper is the first in a series in which the Working Group will present specific, actionable recommendations to improve the global debt resolution architecture. With a wave of sovereign debt restructurings looming, a more effective restructuring process would be a critical systemic improvement.
“With the diversification of financing sources and creditors, many of the assumptions that formed the basis of sovereign debt restructurings in the past have changed. We must think creatively to improve current practices, particularly in light of the economic fallout of the Covid-19 pandemic, and add new tools better suited for the current context,” said Working Group co-chair William R. Rhodes, who also serves on BWC’s Executive Committee.
The four subsequent papers—previewed in the introductory paper released today—will focus on enhancing debt transparency, promoting equitable burden sharing among all creditors, achieving full and constructive private sector participation, and exploring the prospects for state-contingent financing. The Working Group will release these papers over the next 18 months, reflecting a sustained effort that will permit real-time analysis and policy recommendations as the context evolves.
“The prospective wave of developing country sovereign debt restructurings threatens their economic recovery from Covid-19, while creating risks of financial market strains. Significant reforms are needed to improve the efficiency, inclusiveness, and effectiveness of globally-applicable debt resolution procedures if we are to avoid future debt crises and promote sustainable economic growth”, said Working Group Co-Chair John Lipsky, a member of the BWC Executive Committee.
BWC’s Sovereign Debt Working Group comprises multidisciplinary experts with deep experience in sovereign debt restructuring and international finance. The group is co-chaired by William R. Rhodes, former Chairman and CEO of Citibank, and John Lipsky, former First Deputy Managing Director of the International Monetary Fund. They are joined by Terrence Checki, Richard J. Cooper, William C. Dudley, Gail Kelly, Joaquim Levy, Maria Ramos, Susan Segal, José Viñals, and Mark Walker.
The Bretton Woods Committee plans to launch similar initiatives that will convene experts and contribute timely intellectual leadership on critical international economic and financial issues. “The BWC aspires to be the global authority on multilateral economic cooperation. We view the Sovereign Debt Working Group as a first example of our efforts to have greater impact through practical policy analysis and recommendations,” said BWC Chairman William C. Dudley.
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