Abstract
The timely and orderly resolution of sovereign debt crises has long been a key challenge facing the global financial architecture. The framework for crisis resolution evolved in response to the capital account crises of the 1990s (Mexico, Russia, Southeast Asia), the Argentine crisis of 2001 and its aftermath, and the Global Financial Crisis of 2008–9 which morphed into the Euro area debt crisis of 2010–12. Efforts to expedite crisis resolution involved a two-pronged approach, one focusing on IMF policies and lending facilities and the other on ways to overcome the collective action problems involved in restructuring securitized debt. This paper examines these efforts in the context of the crises that triggered them and provides some guidance for the future. It argues that the way forward involves action on several fronts, including restoration of the essential principle that IMF programs should aim at reaching a manageable debt position within the program period with a high probability.
Acknowledgments
The author would like to thank Tamon Asonuma, Anne Krueger, Greg Makoff, the IMF’s Debt Policy Division, and two anonymous referees for helpful comments on an earlier draft. Any remaining errors or omissions are the responsibility of the author.
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