Restructuring Sovereign Debt: The Case for Ad Hoc Machinery » (1st Edition)

Viewing current controversies over bond restructuring in the international financial system as the fourth major debate about the machinery for sovereign debt workouts since the advent of the Bretton Woods system, Rieffel (a former officer of USAID, as well as the IMF) argues that the creation of the Paris Club in the 1950s for the restructuring of debt owed to government agencies and the 1970s London Club for restructuring debt owed to commercial banks offer examples of why ad hoc machinery is a better idea than attempted permanent fixes. This stands in distinct contrast to what the IMF is currently advocating in the form of the proposed Sovereign Debt Restructuring Mechanism. Annotation ©2004 Book News, Inc., Portland, OR

Foreign Affairs

In recent decades, countless governments have borrowed too much abroad and subsequently had to reschedule or scale back their payments to foreign creditors (Argentina being only the most recent in a long list). As a result, there have been various suggestions for streamlining, formalizing, and legalizing the procedures for dealing with sovereign debt problems. But in fact, reasonably orderly procedures have developed on an informal basis as collective experience builds. In this useful reference, Rieffel, for many years an official at the U.S. Treasury, provides a thorough account of the post-1950 evolution of procedures for dealing with sovereign debt owed to both official and private creditors. After critically examining proposals for major institutional overhauls, he vigorously defends the ad hoc, evolutionary approach, while offering his own recommendations for modest improvements on current practices.