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Reprofiling Sovereign Debt, Lee C. Buchheit, Mitu Gulati, Ignacio Tirado
Reprofiling Sovereign Debt, Lee C. Buchheit, Mitu Gulati, Ignacio Tirado
Faculty Scholarship
• The IMF staff’s 2013 proposal to reprofile (i.e., stretch out for a short period without haircutting principal or interest) the maturing debt of a country that has lost market access is a sensible policy in cases where the IMF is uncertain whether the country’s debt stock is sustainable.
• The motivation for the policy is to avoid situations, such as occurred during the Eurozone debt crisis, in which Fund resources are used to bail-out commercial creditors in full.
• But a debt reprofiling is a species of debt restructuring and as such is susceptible to holdout creditor behaviour.
• …