Sovereign Domestic Debt Restructuring: Handle with Care by Peter Breuer, Anna Ilyina, and Hoang Pham published by IMF/Blog (12/2021).
“Restructuring domestic debt is like surgery: You only do it if you must, and you avoid it if it might do more harm than good.
With rising debt vulnerabilities and growing stocks of sovereign domestic debt in emerging and developing economies, the questions of when and how to restructure such debt are now more acute than ever.
Over the past two decades, emerging market developing economies have seen their share of sovereign domestic debt—let’s call it “domestic debt” for short—increase from 31 to 46 percent of their total sovereign debt. Thus, restructuring of domestic debt is likely to play a role in the resolution of future debt crises. A new IMF paper draws on the past 40 years of sovereign debt restructurings to offer some insights into the key considerations for a domestic debt restructuring that restores debt sustainability while minimizing the disruption caused…”
