Browse
Abstract
1. The origins of the 1980s Debt Crisis can be traced back to the acute shocks to the international monetary system in the 1970s: the collapse of the Bretton Wood system; the major oil prices hikes; and the substantial liberalization of international finance. The associated build-up of imbalances and vulnerabilities during this period ended abruptly in the early 1980s, and the IMF had to deal with its first systemic debt crisis. Given the novelty of this event, it took time for debtors, creditors, and the international community to understand the magnitude of the problems faced by these indebted economies. Reforms to the crisis-resolution framework occurred gradually and often in a piecemeal fashion. But the reforms made during the 1980s set the foundation for the IMF’s policies and principles today, remaining robust despite a continually changing landscape.
Abstract
1. The debt crisis ended along with the 1980s, and 1989 saw interest rates drop and prospects for economic growth brighten. With the 1990s, private capital began flowing again to emerging and developing countries. This renewed interest in investment was bolstered by liberalization of international capital flows and widespread deregulation of financial institutions and capital markets. As the recipient economies found, however, the speculative inflows were subject to sudden capital flow reversals and stops.
Abstract
1. In 2001–02, Argentina experienced one of the worst economic crises in its history. The severity of the crisis, and the economic/political complexity for debt crisis resolution made it particularly important to examine what lessons could be learned from it [40]. The circumstances of the crisis highlighted the need to establish a better framework for countries to exit in a timely fashion from unsustainable debt dynamics. In the aftermath of the crisis, the IMF focused its work particularly on two areas aiming to promote a more orderly system for the resolution of sovereign debt crises: rethinking the framework for committing exceptional levels of IMF resources, and considering methods for addressing collective action problems. On the latter, the IMF considered in parallel both statutory and contractual approaches.
Abstract
1. In the aftermath of the Argentine crisis, IMF members experienced a relatively calm period. There were few IMF-supported programs (Brazil, Turkey, Uruguay) under the Exceptional Access Policy (EAP—see chapter 3), largely due to balance of payments problems in the current account, and relatively few sovereign debt restructurings (e.g., Uruguay, Dominican Republic, Grenada, and Belize). However, imbalances and vulnerabilities were growing and subsequently erupted in 2007 [58].
Abstract
In the extreme circumstances where a restructuring of sovereign debt becomes unavoidable, an overarching objective is to restore the country’s debt to a sustainable path—a situation in which the borrower is expected to be able to continue servicing its debt without an unrealistically large correction to the balance of income and expenditure. Assessing whether debt sustainability has been restored involves an evaluation of the nature of the crisis—including whether it is one of solvency or liquidity—and requires complex judgments, particularly regarding whether a debt restructuring would be sufficient to contribute to a credible and durable exit from the crisis and enable the country to regain access to international capital markets.1
Abstract
To provide the context, the initial conditions that led to a restructuring of sovereign debt are examined; then the scope and salient features of the debt restructurings are reviewed; and, finally, the outcome of the debt restructurings and debt dynamics around the time of restructuring are presented.
Abstract
Given the different initial conditions, scopes, and outcomes of each of the debt operations, this chapter attempts to examine the extent to which debt sustainability has been restored. However, assessing the impact of the debt operations themselves on debt sustainability is difficult, as they took place amid changes in both the external environment and domestic economic policies that had, among others, an impact on market confidence. Against this background, this chapter asks whether the debt operations, in combination with supporting economic policies, contributed to a return to sustainability. The assessment is based on data available as of late 2005.
Peter Kenen presented the SDRM in a more positive light than he had on previous occasions, saying he now favored the statutory approach over the contractual approach (see box on features of the SDRM, page 37).
Abstract
The purpose of this paper was to review recent experience with the restructuring of sovereign debt owed to private creditors and to try to determine whether the objective of restoring sustainability has been achieved. Three broad criteria have been applied in evaluating whether countries have succeeded in this objective: (1) the debt profile and debt vulnerability scores as estimated by an EWS model; (2) vulnerabilities stemming from the liquidity position, as indicated by the financing needs and the level of international reserves; and (3) medium-term debt-related vulnerabilities as presented in sensitivity analyses conducted in the context of the DSAs.