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Overcoming Developing Country Debt Crises$
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Barry Herman, José Antonio Ocampo, and Shari Spiegel

Print publication date: 2010

Print ISBN-13: 9780199578788

Published to Oxford Scholarship Online: May 2010

DOI: 10.1093/acprof:oso/9780199578788.001.0001

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How to Rethink Sovereign Bankruptcy

How to Rethink Sovereign Bankruptcy

A New Role for the IMF?

Chapter:
(p.449) 16 How to Rethink Sovereign Bankruptcy
Source:
Overcoming Developing Country Debt Crises
Author(s):

Patrick Bolton

David A. Skeel, Jr.

Publisher:
Oxford University Press
DOI:10.1093/acprof:oso/9780199578788.003.0016

This chapter suggests investigating a new bankruptcy approach for resolving sovereign debt crises. While some of the basic ideas have been presented in other papers, the innovation introduced here is to put the IMF at its center. One key to the proposal is that instead of the IMF lending only its own funds to the distressed sovereign, which it can no longer do in amounts sufficient to counter international financial market panics, it would also be empowered to authorize private creditors to extend new credits that would have higher repayment priority than already outstanding debt, as is done in corporate bankruptcy cases. It is envisaged that amounts of such credit above some modest level would have to be approved by the defaulted creditors and that contributing private creditors would also need to be brought into the negotiations over the rescue package.

Keywords:   IMF, sovereign bankruptcy, international lender of last resort, international monetary financial committee

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