Sovereign Debt Restructuring
Sovereign Debt Restructuring
This chapter is devoted to exploration of emerging new realities of liquidity facilities for the sovereigns and sovereign debt restructuring in the global economy. Prospects for establishing orderly sovereign debt-restructuring mechanisms are very limited and the disorderly case-by-case debt restricting appears to favour the financial markets relative to sovereigns. In fact, there are considerable uncertainties in regard to the liquidity support facilities available in future in the global economy, particularly for meeting the needs of developing economies. The prospects for formal debt restructuring mechanisms that would give comfort to the sovereigns at the time of fiscal stress do not appear to be very bright. In such a situation, the assessment of debt sustainability by policymakers will have to take account of the perception of financial markets, the prospects for liquidity support and in the extreme case, the scope for relatively smooth debt restructuring.
Keywords: swap lines among central banks, IMF liquidity support, sovereign debt restructuring, Mexico, Brady plan, SDRM, Chang Mai Initiative, IMF, World Bank, BRICS Bank
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