Study On The Sovereign Debt Restructuring Mechanism Of The IMF

Since the1990s, the international community paid special attention to theproblem of sovereign debt restructuring because the frequent outbreak of thesovereign debt crisis. And at the current background that a lot of private capital beflowed into emerging market countries and international capital flows structural hasbeen changed. The private direct investment have replaced bank loans and officialcapital to be the most important source of external funding in developing countries.And bonds have replaced bank loans to be the main financing way of countries. Thesefactors enhance the diverse nature of the bondholders, and making the sovereign debtrestructuring process presents unprecedented disorder and unpredictability. In general,the traditional method of the sovereign debt restructuring is solved on a case by casebasis. But this method has not been enough to solve the national debt crisis at abovebackground. And the collective action problems and moral hazard problems in therestructuring serious hindered the efficiency of the sovereign debt restructuring.Because of these questions, sovereign debt restructuring process is slow and costly,the interests of debtors and creditors will be damaged. In respond to the issues raisedabove background, IMF suggested to set a sovereign debt restructuring mechanism.Because of the legal nature of the mechanism, it is also known as the SDRM. Although this mechanism has not yet been setted, but the advantages of the designmakes it to be the development direction to solution of the sovereign debt defaultinevitably.In this issue, the writer states the meaning, characteristics fo the sovereign debtdefault and the relevant questions of the debt restructuring. Then through thecomparison, analysis and commentary of the relevant provisions of the SDRM andcontact method of the sovereign debt restructuring to summed up related advantagesand lack of the legal method. Meanwhile, the writer put forward own opinion on thenecessary and relevant contact of the collaborative reform between the SDRM andIMF. In addition to forward and conclusions, this paper includes three chapters.The first chapter is an overview of the sovereign debt and sovereign debt default.The writer summarize the questions which should be solved in the current sovereigndebt restructuring framework on the base of the history of the traditional sovereigndebt restructuring system. Then the writer introduced the new approach to sovereigndebt restructuring which designed by IMF.The second chapter is detailed analysis of the designs of the IMF-led legalapproach to sovereign debt restructuring. And the writer demonstrate the advantagesand necessary of the legal approach by comparing contact method which use thecollective action clause to promote the sovereign debt restructuring.In the Third chapter, the writer analyzed the current limitations andimplementation difficulties of the SDRM. And on this basis, the writer in order tomake the approach more feasible and improve the IMF’s current functional roles,envisaged relevant methods for collaborative reform between the SDRM and IMF.