Dealing with the new wave of debt overhangs: A Framework to Evaluate Economic Adjustment-Cum-Debt Restructuring Packages

Reza Baqir, Ishac Diwan and Dani Rodrik

No 2301, FDL Policy Notes from CEPREMAP

Abstract: Badly hurt by a series of negative shocks and increasingly shut-off from capital markets, many developing countries are at risk of falling into a debt crisis. The current global financial architecture reacts through the negotiation of complex packages that include the debtor country, international financial institutions (IFIs), and external creditors. The debtor must promise to “adjust†; the IFIs must put up new loans and enforce conditionality; and creditors must accept some amount of debt and debt service reduction. In this paper, we discuss how the diverse aspects of such adjustment-cum-debt restructuring packages can be evaluated in a coherent fashion. A unified treatment of such packages allows us to highlight important questions that tend to be less evident when studying them in isolation.

Keywords: Debt overhang; development and growth; debt restructuring; policy conditionality; multilateral development banks (search for similar items in EconPapers)
Pages: 26 pages
Date: 2023-01
New Economics Papers: this item is included in nep-fdg and nep-opm
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Persistent link: https://EconPapers.repec.org/RePEc:cpm:notfdl:2301

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