Introduction
The sharp, COVID-19-related buildup in sovereign borrowing by emerging and developing economies represents a looming challenge: Many countries will require relief in the next few years to restore debt sustainability and assure access to needed financial flows. At the same time, it is evident to both observers and participants that significant reforms are urgently needed to improve the efficiency, inclusiveness, and effectiveness of sovereign liability management.
The Bretton Woods Committee is dedicated to effective global economic and financial cooperation. It is clear that the prospective problems of sovereign debt will engage International Financial Institutions (IFIs), governments, and the private sector alike. In anticipation, the Bretton Woods Committee formed a Sovereign Debt Working Group. The Working Group is developing concrete proposals and will seek to build consensus around new approaches and market practices suited to the anticipated post-COVID-19 round of sovereign debt restructurings.
This introductory paper, titled Sovereign Debt: A Critical Challenge, is the first in a series planned by the Working Group over the coming 18 months. Each successive publication will address one of the four key aspects of this challenge—previewed in this paper—and will culminate in a summary paper presenting the conclusions of the Working Group’s study and deliberations.
