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N° 223 |
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| May 2003 |
| Sovereign Debt Crises
and Multilateral Action Following the Rejection of the Krueger Proposal |
| Jérôme Sgard |
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| The principle of restructuring
sovereign bond issues via an appeal to collective action clauses, in a contractual
manner, seems likely to become general usage. This follows the rejection of the
International Monetary Fund’s proposal to create a “bankruptcy law for
sovereign debtors”. Such clauses are both flexible and not very restrictive.
But they do not settle the major issues involved in crisis management: i.e. coordination
among the bearers of public debt, the relationship between such claims and the
IMF, the link between financial negotiation and economic policy commitments by
the country in question. These issues will inevitably surface with respect to
the question of unilateral moratoria on foreign debt and the control of capital
outflows. Such unilateral decisions will continue to raise strategic questions
for the IMF: Can multilateral rules define the conditions in which the public
authorities are permitted to intervene in private contracts established in global
capital markets? |
Abstract |
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