Sovereign Debt Management: Lessons and Policy Implications

Vinod K. Aggarwal and Brigitte Granville

Sovereign Debt: Origins, Management, and Restructuring, 2003

The stability of the international financial system depends on preventing and resolving debt crises. In this concluding chapter we attempt to draw some lessons from the varied opinions expressed in this volume. Consensus seems to emerge on four themes: big bailouts should end; the role of the IMF should be limited; disorderly workouts are costly; and although good economic policies should be rewarded, political discretion means that bailouts are generally driven by creditor governments. These views suggest that a major focus of debt restructuring should be on the reform of ex ante contracts and on enhancing cooperation between private and public creditors. These changes, rather than the creation of new institutions or a significant modification of the IMF’s role appear to be much more politically and economically practicable.

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