A Proposal for a Principled and Pragmatic Approach to Dealing with Market Debt of Low-Income Countries in Debt Distress

What is the feasibility and desirability of a proposal for dealing with the international bonds of low-income countries in distress? At the Financing for Development Dialogues: From Evidence to Action, a roundtable of diverse experts will discuss the proposal based on the assumption that the Common Framework, which is the current approach for dealing with the debts of these countries, is working sub-optimally. They will argue that there is a need for a new and creative approach that meets both bondholders' interest in receiving cash for their bonds and the debtor’s need to resolve its debt problems in a way that is economically, financially, environmentally and socially sustainable.

The proposal on which this panel will focus has two parts. The first part is that the official creditors and the International Monetary Fund (IMF) should create and fund a strategic buyer “of last resort” who can purchase distressed (and expensive) debt at a discount from bondholders. The buyer, now the creditor of the country in distress, can restructure the debt on terms that are appropriate for the circumstances of the debtor country and are consistent with shared principles. The net result is that the bondholders receive cash for their bonds, while the debtor country benefits from substantial debt relief. In addition, the debtor and its remaining official creditors benefit from a simplified debt restructuring process.

Second, both debtors and creditors should commit to the following set of eight shared principles, based on internationally accepted norms and standards for debt restructurings: Guiding norms (credibility, responsibility, good faith, optimality, inclusiveness, effectiveness) and transparency, due diligence, optimal outcome assessment, monitoring, inter-creditor comparability, fair burden-sharing and maintaining market access.

On Monday, December 2 from 3:00-4:15, join us for a hybrid panel event at the Financing for Development Dialogues: From Evidence to Action on pragmatic approaches to debt distress in low-income countries.

Speakers:

- Marina Zucker-Marques, Senior Academic Researcher, Boston University Global Development Center

- Attiya Waris, University of Nairobi and UN Independent Expert on Foreign Debt (virtual)

- Aldo Caliari, Senior Director of Policy and Strategy, Jubilee USA

- Jason Braganza, Executive Director, AFRODAD

- Anne-Laure Kiechel, Founder and CEO, Global Sovereign Advisory

- Vuyelwa Vulmendini, Deputy Executive Director, IMF

- Anna Gelpern, Professor, Georgetown University Law Center

- Daniel Bradlow (Moderator), SARCHI Professor of International Development Law, University of Pretoria

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