Sovereign and Sub-Sovereign Debt Restructuring

Countries borrow too much, often in foreign currency, and sometimes cannot repay on time and in full. The rules for determining how sovereign restructuring proceeds, how any vote on the restructuring terms takes place, and how different creditor groups coordinate terms thus are of significance for the global economy. The process through which the debtor, its creditors, and key global institutions like the IMF agree on the extent of the needed debt relief is of near equal importance.

In 2024, nearly fifteen countries have been frozen out of the bond market, including a subset of systemically important credits. Those countries that have sought to restructure through the G-20’s “Common Framework” have struggled to conclude their restructurings quickly. A broader set of countries are still paying even though their prospects for getting new funding from China or returning to the bond market on viable terms is slim. As a result, there is general consensus that the process of sovereign restructuring when there are multiple competing groups of creditors needs to be rethought, and a growing possibility that a broader set of countries may need to seek a preemptive restructuring. The Project on Sovereign Debt Restructuring will inform the public and private debate on how to strengthen the restructuring process through roundtables, blogs, contributions to FT Alphaville and other publications, and participation leading debt and investor conferences.