IMF official says debt roundtable to focus on broad restructuring hurdles

WASHINGTON  -The International Monetary Fund’s strategy director on Tuesday said the goal of a new sovereign debt panel of creditors and borrowers due to meet on Friday is to try to reach understandings on common standards, principles and definitions for how to restructure distressed country debts.

Ceyla Pazarbasioglu, director of the IMF’s Strategy, Policy and Review Department, told reporters that the Global Sovereign Debt Roundtable does not intend to discuss country-specific debt restructuring issues, but to address some of the broader impediments that have been delaying such relief.

The panel, organized by the IMF, the World Bank and India, this year’s leader of the Group of 20 major economies, is due to hold its first virtual meeting on Friday, Feb 17. This will be followed by an in-person meeting on Feb. 25 on the sidelines of a G20 finance leaders meeting in Bengaluru, India.

Participants include officials from creditor countries China, India, Saudi Arabia, the United States and other wealthy Group of Seven democracies.

Pazarbasioglu said the roundtable also will include the Paris Club of official creditors, the Institute of International Finance, the International Capital Markets Association and other private sector creditors that she declined to identify.

She said six borrowing countries that have recently sought or been through debt restructurings would participate, but declined to name them.

On Monday, three sources had told Reuters that these would include three countries that had requested debt treatments under the G20 common restructuring framework –Ethiopia, Zambia and Ghana — as well as Sri Lanka, Suriname and Ecuador.

“So it’s basically to discuss issues that have been impeding reaching a timely debt restructuring process, and the lessons from the cases that we had in the recent past, and to come up with technical solutions to address these shortcomings,” Pazarbasioglu said.

Zambia requested a debt restructuring under the G20 process more than a year ago, but has been held up by major creditor China’s insistence that local debt owned by foreign investors be included and that the multilateral development banks agree to reduce debt principal along with Beijing.

U.S. Treasury Secretary Janet Yellen has been urging China to move faster on restructurings and to set aside these demands from country-specific debt talks and address them through the roundtable.

Haircuts vs concessional loans

She said the group will try to identify key impediments to restructurings and come up with standards and processes to address them. It will try to reach consensus on the notion that highly concessional loans or grants from multilateral development can achieve the same goals as a debt principal “haircut,” she said.

Other concepts the group hopes to define more precisely include common parameters for analyzing debt sustainability, timing for issuing debt service suspensions and comparable treatment of creditors, Pazarbasioglu said.