Debt sustainability
57
Table 2 Share of developing-country external debt owed to private creditors, 2005-2011 (percentage)
2005
2006
2007
2008
2009
2010
2011
All low- and middleincome countries
55.7
61.8
67.0
68.4
67.2
68.6
70.0
Low-income countries
5.8
6.9
10.0
12.1
13.7
16.6
16.7
Lower-middle income countries
32.0
37.3
41.6
43.6
44.3
45.7
47.6
Upper-middle income countries
68.8
74.0
77.9
79.7
77.9
78.7
79.8
HIPCs
12.0
13.8
16.1
17.1
16.9
19.7
18.6
LDCs
1.4
3.1
5.7
7.3
7.6
8.7
8.5
alternative. If any of the post-HIPCs require a new sovereign debt workout, they will have to rely on the ad hoc process as it exists today for non-HIPCs. As much as the HIPC Initiative has been criticized from different perspectives, it did aim at a comprehensive debt workout that would place the country back on a path of sustainable debt. Post-HIPCs will now have to join with the rest of the countries in debt distress and deal separately with Paris Club creditors, non-Paris Club bilateral creditors, multilateral development banks and the IMF, private banks, suppliers and bondholders, making it difficult to ensure that an adequate overall degree of relief is obtained. In this context, and facing the recent unsatisfying experience in the ad hoc restructuring of Greek sovereign debt, there are nascent signs of a renewed interest in exploring the development of an international sovereign debt workout mechanism that all countries might draw upon. One sign is that in June 2011, the German development ministry brought together 44 high-ranking officials and other stakeholders in a workshop on managing sovereign debt. In summarizing the meeting, the Parliamentary State Secretary noted, “In spite of all the difficulties it is worthwhile to continue to be advocates for the creation of an international debt workout mechanism.”29 A second sign is that in October 2011, the Swiss Parliament adopted a motion that mandated the Federal Council to “present a proposal for a fair and independent international insolvency framework for States… [and] advocate for the international support and the implementation of this proposal”.30 And a third is that in May 2012, the Centre for International Governance Innovation (CIGI) in Canada and the Financing for Development Office of the Department of Economic and Social Affairs of the United Nations Secretariat jointly organized an expert group meeting in New York to encourage a frank, technical discussion among prominent emerging market investors, legal advisors, international organization specialists and academics of possible measures to enhance the effectiveness of the debt-restructuring process. According to 29
German Federal Ministry for Economic Cooperation and Development, “Managing sovereign debt crises in developing countries”, BMZ Workshop, Berlin, 27 June 2011, p. 4, available from http://www.development-finance.org/en/component/docman/ doc_download/948-managing-debt-crises-bmz-wks.htm. 30 See “Debt court idea for bankrupt states gathers pace”, Swissinfo.ch, 7 October 2011.
Source: IMF, World Economic Outlook April 2012 database.
A comprehensive international sovereign debt workout mechanism is needed