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The Future of the International Monetary System

Edited by Marc Uzan

Is the international financial architecture debate over? Not according to leading experts gathered together in this impressive volume who try to identify the key trends that will fashion the international financial system in the years ahead. As history has shown, the evolution of the international monetary system is a slow process. However, the authors argue that we may be entering a new era in which a combination of factors will have lasting consequences on the functioning of the international monetary system and the future role of the IMF.
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Chapter 15: Towards a code for sovereign debt restructuring1

Pierre Jaillet


Pierre Jaillet INTRODUCTION Since the adoption of the ‘Prague framework’ by the International Monetary and Financial Committee (IMFC)2 in September 2000, the international official community has pursued and intensified its efforts to strengthen crisis prevention and resolution, in particular, ensuring that greater private sector involvement has been at the center of international discussions. Recently the focus has increasingly been on addressing sovereign debt restructuring and identifying ways to make it more orderly. More generally, preventing excessive public debt accumulation has become a major concern of the international community as ill-conceived public policies have been clearly identified as a major cause of recent financial distress in emerging economies. Recent experience has demonstrated that the risks of sovereign debt crises should not be overlooked. Sixteen months after defaulting on its external debt, Argentina embarked on the largest debt restructuring ever; Uruguay is currently planning to swap US$5.3 billion of bonds for new securities with a view to restoring medium-term debt sustainability. While in the 1980s sovereign crises used to involve mostly bank loan rescheduling, recent episodes have increasingly entailed the renegotiation of sovereign bonds, reflecting the evolution in the external financing of emerging economies. (See Tables 15.1 and 15.2.) So far, experience with sovereign bond restructuring suggests that collective action problems (that is, the difficulty of identifying bondholders, coordinating meetings with creditors and reaching an agreement supported by a large majority of creditors) are not as severe as many had feared. However, restructuring agreements...

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