The Global Sovereign Debt Roundtable (GSDR) met on October 12, 2023 in Marrakech, Morocco and reviewed progress in reaching common understanding on ways to address key impediments to efficient debt restructuring, and discussed the priority areas for the work going forward.
Global Sovereign Debt Roundtable-Cochairs Progress Report:
October 16, 2023: The Global Sovereign Debt Roundtable (GSDR) met on October 12, 2023 in Marrakech, Morocco and reviewed progress in reaching common understanding on ways to address key impediments to efficient debt restructuring, and discussed the priority areas for the work going forward. At the end of the meeting, the International Monetary Fund Managing Director Kristalina Georgieva, World Bank President Ajay Banga and Finance Minister of India, Nirmala Sitharaman, co-chairs of the GSDR, issued the attached GSDR Cochairs Progress Report. The Global Sovereign Debt Roundtable (GSDR), set up in February 2023, comprises representatives of the official bilateral creditors from and outside the Paris Club, private sector creditors and borrowing countries.
Pursuing a single metric of comparable treatment for both DDR and EDR seems unlikely to be appropriate—rather, scenario analyses, communication and transparency are essential. The IMF and World Bank staff indicated their intention to work in the coming months on a joint guidance note to help country teams working with countries using the LIC DSF and where a DDR is (or could be) considered. Discussions showed growing support to generally exclude short-term debt (debt with an original maturity of one year or less) from the restructuring perimeter. Some questions were raised on the treatment of SOE debt. Given these different views and considerations, GSDR members agreed that more technical exchanges would help inform this discussion, potentially through a dedicated technical workshop.
Actual Debt Restructuring Cases
Significant progress has also been made in actual debt restructuring cases. There has been a landmark agreement in June between Zambia and their official bilateral creditors, and continued progress in the discussion of other cases. It took 11 months for Chad in 2021 to move from the staff-level agreement for an IMF program to the actual approval of the program by the IMF October 12, 2023 3 Executive Board; 9 months for Zambia in 2022; 6 months for Sri Lanka in March 2023; and 5 months for Ghana in May 2023. This is still beyond the 2-3 months that were observed in the past. In parallel, actual restructuring cases have gained momentum.
GSDR Principals welcomed the positive momentum in resolving individual cases and reaching common understanding on ways to address key impediments at their meeting in Marrakech on October 12, 2023, and agreed on the priority areas to work on going forward. These include further work on domestic debt restructuring and how to treat SOE debt; engagement with credit rating agencies on restructuringrelated issues; and analysis of the drivers of debt accumulation and ways to prevent debt build-up. Many participants also requested discussion on debt transparency and how to support countries confronted with both climate and debt vulnerabilities.
Restructuring Parameters
In practice, in recent restructuring cases, cutoff dates have been decided case-by-case by creditors, generally not later than the date of the staff-level agreement (SLA) reached between the authorities and IMF staff on an IMF-supported program, which protects new financing provided after the SLA. Assessing and enforcing comparability of treatment (CoT) between official bilateral and private creditors remains a divisive issue and no consensus could be reached among all stakeholders.
State Contingent Debt Instruments
Discussions at policy meetings, but also the important case of Zambia, have led to a growing recognition that state contingent debt instruments (SCDIs) can help bridge the gap in certain restructuring negotiations where uncertainty is high, while they should not be the norm.
Next steps for GSDR Work
GSDR Principals discussed and provided guidance on the work agenda for the GSDR going forward. They supported work on: Further advancing the common understanding on technical issues as appropriate. This could include discussions through Technical Group meetings or/and targeted workshops on issues related to the treatment of SOE debt, follow up discussions on issues in domestic debt restructuring such as the situation of non-resident holders of domestic debt, and any other specific issues related to debt and efficient debt restructurings. Participants expressed support for the IMF and World Bank to develop guidance to staff to support countries faced by a potential domestic debt restructuring, which could be further discussed in the context of the GSDR. Exploring further measures and ways to help address debt vulnerabilities and debt restructuring challenges and prevent further build-up of debt. These could include further work on domestic debt restructuring and how to treat SOE debt; engagement with credit rating agencies on restructuringrelated issues; and analysis of the drivers of debt accumulation and ways to prevent debt build-up. Many participants also requested discussion on transparency of domestic and external debt and how to support countries confronted with both climate and debt vulnerabilities.
