The Role of State-Contingent Debt Instruments in Sovereign Debt Restructurings

Charles Cohen, S. M. Ali Abbas, Anthony Myrvin, Tom Best, Peter Breuer, Hui Miao, Alla Myrvoda and Eriko Togo

No 2020/006, IMF Staff Discussion Notes from International Monetary Fund

Abstract: The COVID-19 crisis may lead to a series of costly and inefficient sovereign debt restructurings. Any such restructurings will likely take place during a period of great economic uncertainty, which may lead to protracted negotiations between creditors and debtors over recovery values, and potentially even relapses into default post-restructuring. State-contingent debt instruments (SCDIs) could play an important role in improving the outcomes of these restructurings.

Keywords: Sovereign debt restructuring; Pandemic; COVID-19; Global financial crisis; Sovereign debt default; State-contingent debt instruments; GDP-linked debt; natural disasters clauses; debt sustainability; value recovery instruments; natural disaster clauses; reference variable; debt contract; investor preference; GLW payment; VRI payout; sector debt suspension; investor appetite; debt stock; Eurobond investor; trading partner; upside payout; investor participation; Natural disasters; Bonds; Debt restructuring; Securities; Global; Caribbean (search for similar items in EconPapers)
Date: 2020-11-19
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