## Global Sovereign Debt Roundtable — Sovereign Debt Restructuring: A Playbook for Country Authorities (Version as of April 23, 2025)

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**Canonical URL:** [Global Sovereign Debt Roundtable — Sovereign Debt Restructuring: A Playbook for Country Authorities (Version as of April 23, 2025)](https://www.imf.org/-/media/files/about/faq/gsdr/042325-gsdr-restructuring-playbook.pdf)

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### Scope and legal status
- Non-binding summary of key steps, concepts, and processes observed in recent sovereign debt restructurings undertaken in the context of an IMF-supported program, in particular those restructurings undertaken under the Common Framework.
- Aimed at country authorities considering a restructuring; based on observed practice for a typical defaulted case and recognizes case-specific complexities.
- Published as a GSDR Cochairs document.
- More details available in the Compendium of GSDR Common Understanding on Technical Issues and the IMF’s Guidance Note on the Financing Assurances and Sovereign Arrears Policies and the Fund’s Role in Debt Restructurings.

### Step 0: Before the launch of the restructuring
- Key decisions and early engagement
  - The decision to restructure and whether to request an IMF-supported program and World Bank and other partners rests solely with the debtor sovereign.
  - Debtor authorities should initiate early discussions with IMF and World Bank staff when (and if) that decision is taken.
- Determination of the restructuring envelope
  - IMF staff develop the program macro-framework scenario with the authorities, consistent with restoring debt sustainability and ensuring balance of payment (BOP) financing.
  - IMF staff (jointly with World Bank staff for countries using the LIC DSF) prepare a pre-restructuring debt sustainability analysis (DSA) based on the macro-framework.
  - The macro-framework and DSA determine the debt restructuring needed to restore debt sustainability and close the BOP financing gap—the “restructuring envelope”.
  - For CF restructurings: “the need for debt treatment, and the restructuring envelope that is required, will be based on the IMF-World Bank DSA and the participating official creditors’ collective assessment, and will be consistent with the parameters of an upper credit tranche IMF-supported program.”
- Staff-level agreement (SLA)
  - SLA defines policy actions and program calibration to support recovery; negotiations with the World Bank and other partners typically advance in parallel.
- Parallel preparatory actions by the authorities
  - Mandate legal and financial advisors with sovereign debt restructuring expertise.
  - Advance debt-data reconciliation to obtain a clear, detailed understanding of public debt (domestic vs external; creditor composition).
    - Creditor composition for external debt typically includes: multilateral institutions; official bilateral creditors (“sovereign-to-sovereign”); private creditors (bondholders and commercial banks).
  - Define a restructuring strategy with advisors, including:
    - Choice of negotiation mechanism with official bilateral creditors:
      - Options: the CF (all G20 and all Paris Club creditors having claims on the country), the Paris Club (PC); a “PC+” format; or separate negotiations with different creditors.
      - Observed practice: for CF-eligible countries, using the CF has helped advance processes in a timely and orderly manner.
    - Perimeter of debt to be restructured:
      - Short-term debt (original maturity of one year or less) is generally excluded.
      - Inclusion of domestic debt is country specific and depends on impact on financial stability and growth.
    - Identifying the cut-off date:
      - Early clarity on the cut-off date is critical; new financing provided after it is excluded from the restructuring.
      - In recent cases, cutoff dates have been decided case-by-case by creditors, generally not later than the date of the SLA.
    - Defining broad contours of creditor efforts and ensuring comparability of treatment (CoT) across creditor groups.
      - Observed practice on CoT for CF-eligible countries:
        - CoT between official and private creditors:
          - Assessed by official bilateral creditors using 3 criteria: The change in debt service over the IMF program; the debt reduction in net present value (NPV) terms (New NPV / Old NPV), using a 5 percent discount rate; and the change in duration of the treated claims.
          - Enforced by official bilateral creditors through claw-back clauses in restructuring agreements or similar mechanisms.
      - For other countries, similar approaches are used; NPV calculations sometimes use two or more discount rates for sensitivity analysis.
      - Private creditors may include clauses in their restructuring terms (e.g., most favored creditor clauses, reinstatement clauses).
  - Start engaging with creditors early; very early engagement can precede SLA and gain time, though deeper technical discussion typically awaits SLA and pre-restructuring DSA.

### Step 1: From SLA to IMF program approval — 2-3 months in the best case observed recently under the Common Framework
- Objectives and timing
  - Rapid establishment of the IMF program is critical to stabilize the economy early.
  - Transition from SLA to program approval requires conditions including “financing assurances” from official bilateral creditors (commitment to deliver debt treatment consistent with restoring debt sustainability).
- Engagements with MDBs and creditors
  - Engage with the World Bank and other MDBs to maximize concessional financing through policy reforms supported by budget support operations; indicative financing envelopes by MDBs are subject to their policies.
  - Early engagement with official bilateral creditors is essential; for CF-eligible countries, this includes rapid formation of an Official Creditor Committee (OCC).
  - If not in arrears to official bilateral creditors, a country can request a solution for debt service during negotiations—this is not automatic and requires case-by-case creditor approval.
  - Engage early with private creditors (bondholders and banks) to gain time; “good faith” engagement is necessary to meet the IMF’s “lending into arrears” policy condition.
  - IMF and World Bank facilitate early engagements by sharing the macroeconomic framework and DSA underpinning the IMF program.
- CoT considerations
  - Be mindful of CoT when engaging different creditor groups; appropriate information sharing supports timely and orderly processes.

### Step 2: From IMF program approval to the restructuring agreement in principle with official bilateral creditors — 6 months in the best case observed recently under the Common Framework
- Expected process
  - Advancing the IMF program (typically the 1st review) involves expectation of reaching an agreement in principle (AIP) with official bilateral creditors.
  - The AIP typically includes key parameters of the restructuring of official bilateral debt, with granular elements finalized later.
- Parallel private creditor negotiations
  - Advancing negotiations with private creditors in parallel accelerates overall restructuring.
  - Negotiations with bondholders are generally coordinated via one or several bondholders committees; collective action clauses ensure coordination for implementation through restructuring offers.
  - Negotiations with individual commercial banks (non-bonded commercial debt) may take more time.
  - CoT considerations across creditor groups remain essential.
- Use of instruments
  - State contingent debt instruments (SCDIs) can sometimes help bridge gaps with creditors’ expectations; should not be the norm and must respect certain conditions when used.

### Step 3: Finalizing the debt restructuring
- Official bilateral creditors
  - For CF cases: move from AIP to signature of a “Memorandum of Understanding” with OCC members, followed by bilateral agreements with each creditor.
  - Non-CF cases follow similar steps.
- Private creditors
  - For bondholders: agreement in principle with bondholders committee followed a few weeks later by a bond exchange; this can occur in Step 2 or Step 3.
  - Negotiations with individual commercial banks may proceed in parallel or be sequenced, typically starting with creditors with larger claims.
  - Finalization should respect CoT considerations.
  - Agreements with official bilateral creditors typically include an assessment of private creditor treatment and claw-back clauses activated if CoT is not met.

### Practical notes on timing and determinants of a timely process
- Best-case observed timelines under the Common Framework:
  - Step 1: SLA to IMF program approval — 2-3 months.
  - Step 2: IMF program approval to restructuring agreement in principle with official bilateral creditors — 6 months.
- The timeline reflects best-case observations and is not a commitment for future cases.
- Timely processes depend on multiple factors, especially actions advanced early by the debtor:
  - Early work on debt data.
  - Early definition of a robust restructuring strategy.
  - Early engagement with creditors with help from the IMF and World Bank.

*Global Sovereign Debt Roundtable — Sovereign Debt Restructuring: A Playbook for Country Authorities (Version as of April 23, 2025)*

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_Source: https://www.imf.org/-/media/files/about/faq/gsdr/042325-gsdr-restructuring-playbook.pdf_