n AfricaGrowth Agenda - Sovereign debt workouts : quo vadis?

Abstract

The existing framework for sovereign debt workouts is often described as a ‘non-system’, a loose mix of Paris Club arrangements for official debts, voluntary renegotiations with commercial creditors, and more ambitious but, ultimately, temporary schemes for debt relief such as the Heavily Indebted Poor Country (HIPC) initiative (which is now nearing its end). With sovereign debt crises looming in a range of countries, from advanced economies to former HIPCs, the question of how such crises should be confronted is again growing louder. Whereas most would agree that the current framework for sovereign debt workouts needs reform, opinions on the design of the reform diverge widely. This short paper outlines a number of initiatives that are currently under way or on the table and discusses their main advantages and drawbacks.