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

Author: Charles Cohen, S. M. Ali Abbas, Anthony Myrvin, Tom Best, Mr. Peter Breuer, Hui Miao, Ms. Alla Myrvoda, and Eriko Togo

COVID-19 may lead to a series of costly & inefficient sovereign debt restructurings. State-contingent debt instruments could play a role in improving outcomes.

Volume/Issue: Volume 2020 Issue 006

Publication date: November 2020

ISBN: 9781513556482

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Topics covered in this book

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Investments and Securities-General , Economics- Macroeconomics , Money and Monetary Policy , Economics / General , Natural Disasters , Sovereign debt restructuring , Pandemic , COVID-19 , Global financial crisis , Sovereign debt default , State-contingent debt instruments , GDP-linked debt , natural disasters clauses , debt sustainability , value recovery instruments , natural disaster clauses , reference variable , debt contract , investor preference , GLW payment , VRI payout , sector debt suspension , investor appetite , debt stock , Eurobond investor , trading partner , upside payout , investor participation , Natural disasters , Bonds , Debt restructuring , Securities , Global , Caribbean

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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.