This paper was prepared by Fund staff, and is intended as a step toward responding to the request from the International Monetary and Financial Committee for the Fund to develop a concrete proposal for a statutory sovereign debt restructuring mechanism which could be discussed at its next meeting in the Spring of 2003. It provides a comprehensive discussion of the principal features of a possible statutory approach, and inevitably raises a large number of complex issues. In developing the proposals staff have benefited from extensive discussion with private market participants, restructuring practitioners and other workout specialists, academics, and members of the official community.

The paper reflects work in progress, and is being published in order to facilitate public understanding and discussion of the proposals. As can be seen from the "Executive Board Assessment" (see Public Information Notice No. 03/06), it does not necessarily reflect the views of the Executive Board. Indeed, in their discussion, a number of Directors underscored their wish to continue to consider a number of options for the design of the mechanism that are not favored in the paper. They stressed that in a number of areas in which the proposals have been developed in the current paper, all options should remain on the table. These include, the scope of debt covered by the mechanism, a possible stay on the enforcement of contractual rights, and the functions of the proposed Sovereign Debt Dispute Resolution Forum (SDDRF).

Anne O. Krueger

First Deputy Managing Director