Sovereign Debt Restructuring Mechanisms: Trends, Tools, and Global Case Studies

Mykhailo Hantsiak

MPRA Paper from University Library of Munich, Germany

Abstract: In Ukraine, the debt crisis has intensified, manifested in the growth of public liabilities, an expanding budget deficit, and increasing pressure on public finances. Limited domestic funding sources compel the state to actively borrow on the debt market, exceeding safe limits and heightening insolvency risks. Under these conditions, debt restructuring emerges as a key tool to prevent financial destabilization. Global experience provides insights into effective mechanisms that can be adapted to Ukraine’s realities to restore debt sustainability. The purpose of the study is to outline the key principles for implementing sovereign debt restructuring mechanisms, with a focus on global experience, to develop recommendations for their successful application in Ukraine. The study is based on official statistical data from Ukraine and international financial institutions, scientific publications, analytical reports, and examples of global debt restructuring cases. Methods of analysis and synthesis, comparative and statistical analysis, graphical methods, and the case study approach were employed to identify trends and assess the effectiveness of debt mechanisms. The necessity of restructuring as a key tool for stabilizing public finances has been substantiated. The effectiveness of restructuring mechanisms has been shown to depend on the depth of changes to debt conditions and coordination with creditors. Emphasis has been placed on the role of comprehensive reforms and fiscal consolidation. A comparison of global cases of successful and unsuccessful restructurings has been conducted. The main tools and approaches to their implementation have been systematized. The conclusion has been drawn on the advisability of adapting the best international practices to Ukraine’s conditions. Sovereign debt restructuring is a crucial tool for reducing debt burden and restoring financial stability, but its effectiveness depends on a comprehensive approach, coordination with creditors, and accompanying economic reforms. Global experience highlights the advisability of combining various mechanisms and implementing innovative tools. For Ukraine, the key lies in adapting the best international practices to national conditions and maintaining systematic dialogue with creditors to enhance debt sustainability.

Keywords: restructuring; sovereign debt; financial instruments; government borrowings; debt sustainability; debt security; debt crisis (search for similar items in EconPapers)
JEL-codes: E62 F30 F34 G38 H63 (search for similar items in EconPapers)
Date: 2025-09-08, Revised 2025-09-11
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Published in Economic Journal of Lesya Ukrainka Volyn National University 43.3(2025): pp. 36-43

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