Chapter II. The Proposal for a Statutory Sovereign Debt Restructuring Mechanism

Abstract

A statutory approach, as suggested by the International Monetary Fund (IMF), could provide a sustainable solution that would also cover existing debt. The intellectual origins of the IMF's Sovereign Debt Restructuring Mechanism (SDRM) can be traced back to the U.S. Bankruptcy Code. The proposal to use the U.S. Bankruptcy Code as a model for sovereign debt reorganisation was first advocated in 1981 by Oechsli. This chapter highlights the relevant provisions of the U.S. Bankruptcy Code and briefly illustrates their applicability in the sovereign context in order to provide an overview of the statutory approach. In the process of sovereign debt reorganisation, there has been a discussion of whether new financings shall be excluded from the SDRM. Consequently, they would not be required to suffer the cuts ultimately imposed by the reorganisation upon other creditors. It is suggested that such new resources should be provided by the IMF.Keywords: International Monetary Fund (IMF); Sovereign Debt Restructuring Mechanism (SDRM); U.S. Bankruptcy Code