Debtors’ Perspective

Governments employ every tactic to avoid a restructuring of public sector debt until it is late. Governments often ignore potential debt sustainability issues, whether related to chronic illiquidity conditions or longterm solvency, until financial resources are all but exhausted, including approaching the IMF for financial assistance

» The CF was modelled on traditional Paris Club processes and traditions employed when developed western countries' claims on low-and middle-income debtor governments represented a significant percentage of total public sector debts. This made a sovereign debt restructuring under an IMF programme easier to implement, as the Paris Club was able to set the tone for the process

» Creditor bases have evolved significantly, with diverse commercial and traditional non-Paris Club creditors now representing a majority segment of total public sector debts in many LICs and MICs

• The CF has not aptly facilitated a reorganization of liabilities. The process is proving protractive, time consuming and is leading to greater financial and social disarray for a debtor country

• The CF does not currently provide guarantee that all creditors will act in concert to help address the causes of a sovereign debt crisis

» IMF must remain an independent arbiter to assist in the formulation and implementation of a credible reform programme to address economic imbalances and restore long-term growth