Global Debt Roundtable Highlights Need for Restructuring Improvements

By Andrea Shalal

WASHINGTON (Reuters) – More work is needed to improve the sovereign debt restructuring process and help countries facing mounting debt service challenges, the chairs of a global debt roundtable said on Wednesday, as they released a new playbook to aid those efforts.

The Global Sovereign Debt Roundtable, formally launched in late 2022 to help accelerate progress on securing debt treatment for countries in default, met Wednesday during the spring meetings of the International Monetary Fund (IMF) and the World Bank.

Co-chaired by the IMF, the World Bank, and South Africa, current chair of the Group of 20 major economies, it includes creditors, borrowing countries, private sector executives, debt experts, and financial and legal advisers.

Progress on Debt Restructuring

Co-chairs noted progress on aspects of the debt restructuring process, including that debtor countries undergoing a restructuring but not in arrears to official bilateral creditors can request suspension of their debt service payments, which was a key assurance for these debtor nations.

Ceyla Pazarbasioglu, the IMF’s strategy chief, indicated that while debt stability risks in emerging markets and developing economies were broadly contained, uncertainty around this baseline had significantly increased due to rising trade tensions. She highlighted several challenges, including high U.S. tariffs and declining commodity prices, that could strain these countries.

Growing Debt Concerns

The IMF also warned that economic pressures from new U.S. tariffs could push global public debt above pandemic-era levels, nearing 100% of global GDP by the decade’s end. The latest Fiscal Monitor projected a rise of global public debt to 95.1% of GDP by 2025 and 99.6% by 2030.

Despite stabilizing public debt levels in many low-income and emerging markets post-COVID-19, some countries remain vulnerable, facing high-interest costs and substantial refinancing needs which detract from education, health, and infrastructure spending.

Calls for Enhanced Restructuring Processes

The co-chairs called for further improvements to the G20 Common Framework and emphasized the need for substantial progress on debt transparency, management, and debtor/investor relations.

The new playbook serves as a user-friendly document summarizing key steps and processes observed in recent sovereign debt restructurings and is meant to be continually updated. It aims to facilitate faster restructurings, ideally within a year.

Transparency and Information Sharing

Discussions highlighted the importance of enhanced transparency in restructuring agreements and addressing delays in post-restructuring credit rating upgrades. The roundtable noted some progress on issues related to non-bonded commercial debt and is committed to improving timelines and data sharing.