Sovereign Debt Restructuring: The Need for a New Approach

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Gelpern, Anna;
Jul 2023
High debt levels after the pandemic raised concerns about a wave of sovereign defaults. A focus has been on low-income countries, but several middle-income nations also face high debt burdens and recent restructurings in Latin America and the Caribbean revealed both unresolved problems and new concerns. In this paper, we document how LAC has been at the center of restructuring innovations and discuss the predicaments of countries with increasingly diverse creditors and instruments. We argue for a regional hub and spoke institutional arrangement to complement existing global initiatives to harness regional knowledge and to speed progress to improve restructuring processes.