You Never Give Me Your Money? Sovereign Debt Crises, Collective Action Problems, and IMF Lending
IMF Working Papers, January 22, 2013
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Bibliographic details
- Authors: Marco Committeri, Francesco Spadafora
- Published: January 22, 2013
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781475578713.001
Summary overview
- Objective: Review the impact of the global financial crisis, and its spillovers into the sovereign sector of the euro area, on the international “rules of the game” for dealing with sovereign debt crises.
- Two main pillars of the international framework:
- The IMF’s lending framework (policies, financing facilities, and financial resources), designed to support macroeconomic adjustment packages based on the key notion of public debt sustainability.
- Contractual provisions such as Collective Action Clauses (CACs) in sovereign bonds, aiming to facilitate coordination among private creditors and contain the costs of a debt default or restructuring.
Major changes to the IMF lending framework (findings and analysis)
- Significant changes prompted by recent crises include:
- Additional financial resources.
- New financing facilities, including precautionary ones.
- Enhanced cooperation with euro-area institutions.
- Revisions to the criteria governing exceptional access to the Fund’s financial resources.
- Crucial innovation in exceptional access criteria:
- For the first time, the criteria explicitly take account of the risk of international systemic spillovers.
Collective Action Clauses (CACs) — developments and consequences
- Role: Facilitate coordination among private creditors to contain costs of default or restructuring.
- Political dynamics: Recent crises provided new political support for broader dissemination of CACs in euro-area sovereign bonds.
- Notable activation: In the first case involving an advanced economy, CACs were activated in the debt exchange undertaken by Greece in Spring 2012.
Policy implications and thematic conclusions
- The international “rules of the game” now reflect:
- A stronger emphasis on systemic spillover risks when assessing exceptional access to IMF resources.
- A combined reliance on public-sector financing (IMF framework and cooperation with regional institutions) and contractual creditor coordination mechanisms (CACs) to manage sovereign debt crises.
- Practical inference: Lending toolkit expansion (resources and facilities) plus contractual reforms (broader CAC dissemination) aim to improve crisis management and reduce the costs of sovereign debt restructurings, especially where cross-border spillovers are material.
Publication metadata (selected)
- Authors: Marco Committeri, Francesco Spadafora
- Date: January 22, 2013
- Pages: 50
- Series: Working Paper No. 2013/020
- Issue: 020
- Volume: 2013
- DOI: https://doi.org/10.5089/9781475578713.001
- ISBN: 9781475578713
- ISSN: 1018-5941
- Subjects: Asset and liability management, Balance of payments, Capital account crisis, Debt restructuring, Financial crises, Public debt, Sovereign debt restructuring
- Keywords: Capital account crisis, Collective action clauses, crisis, debt, debt problem, Debt restructuring, debt sustainability criterion, debtor country, financial support, fund member, fund staff, fund support, Global, IMF financing, lending behavior, lending toolkit, LIA policy, market failure, short-term debt, Sovereign debt restructuring, Systemic spillovers, The Fund, WP
Source: You Never Give Me Your Money? Sovereign Debt Crises, Collective Action Problems, and IMF Lending, Marco Committeri and Francesco Spadafora, IMF Working Papers 2013, 020 (2013), January 22, 2013.