Mon, Apr 5, 2021
Annual Meeting 2021 commenced with the official launch of the Bretton Woods Committee’s Sovereign Debt Working Group in which members of the Working Group – including William R. Rhodes, John Lipsky, Joaquim Levy, Susan Segal, Jose Viñals, and Mark Walker – launched the group’s introductory paper and outlined its work plan.
Sovereign balance sheets have become much more complex, creditors have become more diverse, and sovereign debt levels have risen, all of which has made sovereign debt resolution more challenging and higher-stakes, according to Working Group co-chairs William R. Rhodes and John Lipsky. In response to this new context, the Working Group will produce specific, actionable recommendations that improve debt transparency, ensure equitable burden-sharing, promote private sector participation, and capitalize on state-contingent financing.
Transparency: Segal argued that disclosure is critical because restructuring debt on an equitable basis requires transparency of all debt and liabilities. Viñals agreed, emphasizing that transparency is essential to ensuring private sector participation in debt relief.
Private Sector Participation: To further encourage private sector participation, Viñals also called on the international community to improve upon existing collective action clauses and to develop innovative financing solutions that align private sector and IFI incentives.
Burden Sharing: Levy underscored the importance of equitable burden-sharing, flagging issues such as how to treat new money in the case of private investors and rising interest rates as potential stumbling blocks. He also noted the opportunities to include environment or climate-related clauses in debt renegotiations.
State-Contingent Debt: Walker assessed the weaknesses of value recovery instruments in the past, while noting that progress in regard to state-contingent debt instruments can be made.