InsightsWebinar: Sovereign debt restructuring: A new sovereign debt crisis is coming

Webinar: Sovereign debt restructuring: A new sovereign debt crisis is coming

Quick link to webinar video

Jenny Asuncion
Jun 24, 2021

While bond investors remain enthusiastic about emerging and frontier market debt, credit risk indicators are flashing red for a growing number of sovereigns. Meanwhile, the COVID-19 pandemic only accelerated a trend towards excess indebtedness that, in many countries, had already achieved lift-off.

Amid ongoing macroeconomic uncertainty for many of these economies, the likelihood that they’ll be able to continue servicing their debts remains questionable. Unfortunately, so does creditors’ willingness to agree to a reduced claim—a conundrum that the G20 Common Framework appears to have done little to resolve.

We’ve all seen this movie before: negotiations drag on, uncertainties linger and market access dries up, all while the much-needed investments and spending that could restore economic activity fail to materialise due to stalled funding. This is a movie with an unhappy ending—and not just for debtor nations. Creditors will suffer too, as eventual losses become more severe the longer the can is kicked down a road that grows narrower every day.

All of that said, the prospect of a (perversely?) uplifting sequel offers a glimmer hope: a movie in which COVID-19 catalyses a long-awaited, more sustainable solution to sovereign debt restructurings.

  • Video recording: Link

Written by:
Jenny Asuncion