Staff Discussion Notes

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

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

November 19, 2020

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Charles Cohen, S. M. Ali Abbas, Myrvin Anthony, Tom Best, Peter Breuer, Hui Miao, Alla Myrvoda, and Eriko Togo. The Role of State-Contingent Debt Instruments in Sovereign Debt Restructurings, (USA: International Monetary Fund, 2020) accessed December 21, 2024

Disclaimer: This Staff Discussion Note represents the views of the authors and does not necessarily represent IMF views or IMF policy. The views expressed herein should be attributed to the authors and not to the IMF, its Executive Board, or its management. Staff Discussion Notes are published to elicit comments and to further debate.

Summary

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.

Subject: Asset and liability management, Bonds, COVID-19, Debt restructuring, Environment, Financial crisis, Financial institutions, Financial instruments, Health, Natural disasters, Public enterprises, Securities, Sovereign debt defaults, Sovereign debt restructuring

Keywords: Bonds, Caribbean, COVID-19, Debt contract, Debt restructuring, Debt stock, Debt sustainability, Eurobond investor, GDP-linked debt, Global, Global financial crisis, GLW payment, Investor appetite, Investor participation, Investor preference, Natural disaster clauses, Natural disasters, Natural disasters clauses, Pandemic, Reference variable, Sector debt suspension, Securities, Sovereign debt default, Sovereign debt restructuring, State-contingent debt instruments, Trading partner, Upside payout, Value recovery instruments, VRI payout

Publication Details

  • Pages:

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  • Volume:

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  • DOI:

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  • Issue:

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  • Series:

    Staff Discussion Notes No. 2020/006

  • Stock No:

    SDNEA2020006

  • ISBN:

    9781513556482

  • ISSN:

    2617-6750