## GSDR Cochairs Progress Report — April 17, 2024

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---

### Executive Summary — Significant recent progress in the international debt agenda
- Agreement in January 2024 between Ghana and their official bilateral creditors.
- Agreement in March 2024 between Zambia and the representatives of their Eurobond holders.
- Progress in discussions of other cases, including Sri Lanka and Suriname.
- The Global Sovereign Debt Roundtable (GSDR) provided a platform to advance greater common understanding among key stakeholders and helped forge consensus on improving processes in future cases, including on comparability of treatment and timelines toward swifter and more predictable restructuring processes, while taking into account the specific circumstances of each case.

### Executive Summary — Comparability of Treatment (CoT)
- GSDR discussions underlined the need for enhanced clarity, coordination, and transparency across creditor groups.
- Official bilateral creditors have made progress in explaining the methodology they use to assess and enforce CoT.
- Recommendation: Official bilateral creditors should provide the debtor with clarity regarding the quantitative metrics that need to be respected for the CoT to be met, and the related room for maneuver that exists within these metrics.
- Relevant information should be shared with the other creditors to facilitate and accelerate the restructuring process.
- Recommendation: Private creditors and the debtor should ensure that, before finalizing and announcing an agreement in principle, a verification is completed by the debtor with IMF staff on consistency with debt targets and program parameters and with the official bilateral creditors on CoT.
- Parallel negotiations: Nothing precludes official bilateral and private creditors from advancing negotiations in parallel; GSDR discussions underlined that, should this be the preference of the debtor, parallel negotiations should be supported.

### Executive Summary — Timelines and restructuring process
- Progress on steps necessary before the first review of the IMF program can be presented to the IMF Executive Board:
  - It took 12.4 months for Chad to cover that step in 2022.
  - It took 10.4 months for Zambia in July 2023.
  - It took 8.8 months for Sri Lanka in December 2023.
  - It took 8 months for Ghana in January 2024.
- Progress noted in October 2023 on the time necessary to move from staff-level agreement (SLA) for an IMF program to approval by the IMF Executive Board, combined with the above, led to significant improvements in the overall timeline (almost a division by two between cases that started in 2021 and those that started in the Fall of 2022).
- Timelines remain beyond the typical time frame observed in the past, negatively impacting debtors and creditors.
- Where applicable, in particular for Common Framework cases, the timeline to form an official creditor committee (OCC) could be shortened to take advantage of faster and more efficient sharing of information and to accelerate private creditor restructuring processes.
- Recommendation: In future cases, all relevant stakeholders, including the IMF, the World Bank, and official bilateral creditors, should work expeditiously with the debtor to ensure sufficient information is shared in a timely manner, in particular on DSAs and macroeconomic frameworks, while taking into account the specificities of each case and time for internal coordination and decision.
- Aspiration: Absent specific circumstances impeding timely decision-making, and provided sufficient information is shared early and potential concerns discussed, the proposal for the next debt restructuring case should be set as a trial example to aim for program approval within 2-3 months of SLA.

### Executive Summary — GSDR activities, workshops, and technical work
- Engagement with credit rating agencies (CRAs) to better understand their methodologies and options for early engagement ahead of potential debt operations.
- An open GSDR workshop on climate and debt vulnerabilities focused on debt swaps and climate resilient debt clauses.
- Members underlined the importance of MDB’s financial support to countries undertaking a debt restructuring.
- GSDR Principals supported further work on:
  - An open workshop on comparability of treatment organized by the G20 Presidency and the Paris Club at the end of June.
  - Deepening coordination among stakeholders, including supporting early exchanges on DSAs and debt relief parameters.
  - Work on the use of state-contingent debt instruments (SCDIs), majority voting provisions in syndicated loans, and issues related to debt sustainability analyses and restructuring perimeters, including SOE debt and non-resident holdings of domestic debt.
  - Ways to structurally help prevent unsustainable debt build-up and address current liquidity concerns.
  - Importance of debt management, domestic resources mobilization, and robust investor/creditor-debtor relations.
  - Potential exploration of collateralized financing practices, support for debt-for-development swaps, and ways to increase debt transparency.

### Executive Summary — Policy work and meetings since October 2023
- The G20 continued work to address debt vulnerabilities at working group, Deputies, and Finance Ministers and Central Bank Governors levels.
- The IMF and the World Bank launched the comprehensive review of the debt sustainability framework for low-income countries (LIC DSF).
  - Supplementary guidance to complement the existing 2018 LIC DSF staff guidance note is being prepared to address issues more prominent for DSAs, including domestic debt, climate considerations and the use of DSAs in debt restructurings.
  - This supplementary guidance will be ready by Summer 2024.
- GSDR Deputies met on December 18, 2023, and again on April 3, 2024, to discuss priorities and technical work.
- Two GSDR Technical Group meetings were held on February 7 and March 8, 2024:
  - The February 7 meeting included separate sessions with each of the three major CRAs to better understand methodologies and early engagement options.
  - The March 8 meeting covered comparability of treatment, restructuring timelines and predictability, and issues related to DSAs and restructuring perimeters (non-resident holdings of domestic debt and SOE debt).
- An open GSDR workshop on climate and debt vulnerabilities was held on March 4, 2024, with broad participation from GSDR members, G20 members, Paris Club members, private creditors, borrowers, MDBs, CSOs, debt experts, and advisory firms.

### Executive Summary — Actual debt restructuring cases — advances and comparative timelines
- Ongoing restructurings progressed both under the Common Framework (CF) — Zambia and Ghana — and outside — Sri Lanka and Suriname.
- Observed timelines (dates and intervals preserved exactly as in source):

  - Chad
    - Date of SLA: January 27, 2021
    - Paris Club / OCC assurances: June 16, 2021
    - Program approval: December 10, 2021
    - AIP reached with PC or OCC: November 11, 2022
    - 1st review: December 22, 2022
    - 2nd review: December 22, 2022
    - Number of months passed between SLA & program approval: 10.5
    - Number of months passed between program approval & 1st Review: 12.4
    - Number of months passed between SLA & 1st review: 22.9

  - Zambia
    - Date of SLA: December 3, 2021
    - Paris Club / OCC assurances: July 30, 2022
    - Program approval: August 31, 2022
    - AIP reached with PC or OCC: June 22, 2023
    - 1st review: July 13, 2023
    - 2nd review: December 20, 2023
    - Number of months passed between SLA & program approval: 8.9
    - Number of months passed between program approval & 1st Review: 10.4
    - Number of months passed between SLA & 1st review: 19.3

  - Ghana
    - Date of SLA: December 12, 2022
    - Paris Club / OCC assurances: May 12, 2023
    - Program approval: May 17, 2023
    - AIP reached with PC or OCC: January 12, 2024
    - 1st review: January 19, 2024
    - Number of months passed between SLA & program approval: 5.2
    - Number of months passed between program approval & 1st Review: 8.0
    - Number of months passed between SLA & 1st review: 13.2

  - Suriname
    - Date of SLA: April 29, 2021
    - Paris Club / OCC assurances: November 30, 2021
    - Program approval: December 22, 2021
    - AIP reached with PC or OCC: June 22, 2022
    - 1st review: June 14, 2023
    - 2nd review: December 15, 2023
    - Number of months passed between SLA & program approval: 7.8
    - Number of months passed between program approval & 1st Review: 17.7
    - Number of months passed between SLA & 1st review: 25.5
    - Note: The protracted timeline for Suriname was not only owed to difficulties in the restructuring process, but other country-specific circumstances.

  - Sri Lanka
    - Date of SLA: September 1, 2022
    - Paris Club / OCC assurances: February 7, 2023
    - Program approval: March 20, 2023
    - AIP reached with PC or OCC: November 29, 2023
    - 1st review: December 12, 2023
    - Number of months passed between SLA & program approval: 6.6
    - Number of months passed between program approval & 1st Review: 8.8
    - Number of months passed between SLA & 1st review: 15.4

- Context: Recent restructuring processes of debt owed to private creditors have also taken more time than in the past, reflecting complex interactions between official bilateral and private restructuring processes, including regarding comparability of treatment, contributing to delays. Typical past timelines cited: 2-3 months between SLA and program approval, followed by 4-6 months to finalize terms of treatment and allow the first review to proceed.

*Source: GSDR Cochairs Progress Report — Executive Summary (April 17, 2024).*

### Section 2 — Vulnerabilities and debt restructuring challenges — progress and remaining needs
- Further progress in actual debt restructurings and meetings/workshops advanced international debt discussions on key topics.
- Need for strengthened predictability and efficiency of restructuring processes to avoid delays that can put at risk debtor countries’ economic recovery.
- IMF assesses the envelope of debt relief needed to restore debt sustainability and prospects for successful restructuring but does not interfere in debtor-creditor negotiations or take a view on inter-creditor equity; burden sharing is for the debtor to agree with its creditors.

### Section 2 — Comparability of Treatment (CoT): assessment and enforcement
- Official bilateral creditors have been using an approach where CoT is:
  - Assessed using the three Common Framework criteria:
    - i. The changes in nominal debt service over the IMF program period;
    - ii. Where applicable, the debt reduction in net present value terms (NPV), using a “New NPV / Old NPV” formula and the discount rate of the LIC DSAs (currently 5 percent);
    - iii. The extension of the duration of the treated claims; and
  - Enforced via mechanisms such as claw-back clauses and/or request to remain in arrears vis-à-vis private creditors until an agreement has been found that respects CoT.
- For restructurings outside the Common Framework, similar assessment and enforcement mechanisms have been used; NPV calculations sometimes rely on two or more discount rates to ensure sensitivity analysis.
- Presence of multiple CoT parameters can make it difficult for stakeholders to understand parameter interactions and compensation across dimensions, risking delays.
- GSDR discussions reconfirmed official bilateral creditors’ intent to maintain this approach in future cases.

### Section 2 — Recommendations to improve CoT clarity and coordination
- Enhanced information sharing and coordination across creditor groups on CoT metrics, including expected NPV relief:
  - Official bilateral creditors should provide the debtor with clarity regarding the quantitative metrics required for CoT and the related room for maneuver.
  - Relevant information should be shared with other creditors to facilitate and accelerate restructuring.
- Timely verification of consistency with debt targets and IMF program parameters:
  - Timely information sharing on the restructuring strategy by the debtor country to IMF staff is key and should happen before any restructuring agreement is made public.
- Operational coordination expectations:
  - Official bilateral creditors should ensure timely communication of key data upon which CoT will be assessed.
  - Private creditors and the debtor should ensure that, before finalizing and announcing an agreement in principle, a verification is completed by the debtor with IMF staff on consistency with program parameters and with official bilateral creditors on CoT.
- Parallel negotiations:
  - Steps do not require a sequential process; parallel negotiations by official and private creditors are permissible and, if preferred by the debtor, should be supported.

### Section 2 — Restructuring timelines and predictability
- Historical timelines:
  - In the past, the process from staff level agreement (SLA) to program approval could take place within 2-3 months, with another 4-6 months to get to the Agreed Minutes and first review of program.
- Recent developments:
  - The process has become slower and more complex due to expanded discussions on procedures, perimeter, parameters, and technical aspects.
  - Encouraging signs of improvement (see Section 1 of source).
- Targets and proposals:
  - Where applicable, the timeline to form an official creditor committee (OCC) could be shortened to improve information sharing and coordination.
  - Recommendation that, absent specific circumstances impeding timely decision-making and with sufficient early information sharing, the proposal for the next debt restructuring case should be set as a trial example to aim for program approval within 2-3 months of SLA.

### Section 2 — DSA and restructuring perimeters — technical issues under discussion
- Ongoing discussions related to LIC DSF cases include treatment of:
  - Non-resident holders of domestic debt (NRHs).
  - State-owned enterprise (SOE) debt.
- These issues are likely to continue as part of the comprehensive review of the LIC DSF.

### Section 2 — Non-Resident Holders (NRHs) of domestic debt
- Emerging consensus on case-by-case treatment of NRHs in restructurings.
- Divergent views:
  - Some participants advocate including NRHs in the restructuring envelope if they are included in the DSA.
  - Others note NRHs hold instruments governed by domestic law and are intrinsically linked to authorities’ decisions on including/excluding “domestic debt” from the restructuring perimeter.
- Further discussion needed to deepen common understanding; trade-offs and country-specific scenario analysis are required.

### Section 2 — State-Owned Enterprise (SOE) debt
- Limited progress toward consensus on SOE debt treatment.
- Divergent views:
  - Some participants: SOE debt should be excluded from DSA and restructuring perimeters.
  - Others: SOEs are a relevant source of fiscal risk, especially in LICs, and their inclusion in the DSA perimeter in application of the current LIC DSF (with limited exceptions) is warranted.
- Confirmed flexibility: creditors and debtor can agree on a restructuring perimeter that differs from the DSA perimeter, with inevitable burden-sharing consequences.
- Issue will continue to be discussed, including in the LIC DSF review.

### Section 2 — Engagement with Credit Rating Agencies (CRAs)
- GSDR Technical Group meeting on February 7 improved understanding of CRA methodologies and approaches in sovereign rating assessments.
- CRAs explained criteria to classify Distressed Debt Exchanges (DDEs), focusing on reduction of value to holders relative to contractual terms and whether the exchange aims at avoiding default.
- Discussion points:
  - Rating implications of debt swaps and liquidity relief operations, including multilateral initiatives such as the G20 Debt Service Suspension Initiative (DSSI) in 2020-21.
  - CRAs clarified debt-for-nature/debt-for-development swaps treated like any debt exchange operation (which may or may not imply distress).
  - Liquidity operations assessed case-by-case depending on whether the exchange qualifies as DDE.
- Participants emphasized need for increased transparency, information sharing, and communication; CRAs noted existing extensive discussion with issuers and welcomed even closer engagement.

### Section 2 — Addressing climate and debt vulnerabilities
- Debt-for-nature/debt-for-development swaps:
  - Viewed as potentially useful liability management tools but generally not appropriate where debt restructuring is required.
  - Can reduce or smooth debt service and redirect resources, but are difficult to scale up, highly complex, and customized.
  - Need for careful overall cost-benefit analysis and more work to standardize and scale these instruments; diverse views on public support and emphasis on alignment with development outcomes and country priorities.
  - Need to increase transparency of documentation and governance.
- Climate Resilient Debt Clauses (CRDCs):
  - Generally viewed as useful; scaling up voluntary use was largely supported.
  - Technical issues for wider adoption were discussed; some official creditors shared successful experiences including such clauses in loans.
  - Expansion beyond hurricane events is challenging due to limited data history; ongoing work to define standard clauses for other events is promising.
  - Transparency and clarity about indicators triggering clauses are critical.

*Source: gsdr-cochairs-progress-report-april-2024 — Section 2: Building Further Common Understanding on Debt*

### Executive Summary

### Executive Summary

### Significant recent progress in the international debt agenda
- Agreement in January 2024 between Ghana and their official bilateral creditors.
- Agreement in March 2024 between Zambia and the representatives of their Eurobond holders.
- Progress in discussions of other cases, including Sri Lanka and Suriname.
- The Global Sovereign Debt Roundtable (GSDR) provided a platform to advance greater common understanding among key stakeholders and helped forge consensus on improving processes in future cases, including on comparability of treatment and timelines toward swifter and more predictable restructuring processes, while taking into account the specific circumstances of each case.

### Comparability of Treatment (CoT)
- GSDR discussions underlined the need for enhanced clarity, coordination, and transparency across creditor groups.
- Official bilateral creditors have made progress in explaining the methodology they use to assess and enforce CoT.
- Recommendation: Official bilateral creditors should provide the debtor with clarity regarding the quantitative metrics that need to be respected for the CoT to be met, and the related room for maneuver that exists within these metrics.
- Relevant information should be shared with the other creditors to facilitate and accelerate the restructuring process.
- Recommendation: Private creditors and the debtor should ensure that, before finalizing and announcing an agreement in principle, a verification is completed by the debtor with IMF staff on consistency with debt targets and program parameters and with the official bilateral creditors on CoT.
- Parallel negotiations: Nothing precludes official bilateral and private creditors from advancing negotiations in parallel; GSDR discussions underlined that, should this be the preference of the debtor, parallel negotiations should be supported.

### Timelines and restructuring process
- Progress on steps necessary before the first review of the IMF program can be presented to the IMF Executive Board:
  - It took 12.4 months for Chad to cover that step in 2022.
  - It took 10.4 months for Zambia in July 2023.
  - It took 8.8 months for Sri Lanka in December 2023.
  - It took 8 months for Ghana in January 2024.
- Progress noted in October 2023 on the time necessary to move from staff-level agreement (SLA) for an IMF program to approval by the IMF Executive Board, combined with the above, led to significant improvements in the overall timeline (almost a division by two between cases that started in 2021 and those that started in the Fall of 2022).
- Timelines remain beyond the typical time frame observed in the past, negatively impacting debtors and creditors.
- Where applicable, in particular for Common Framework cases, the timeline to form an official creditor committee (OCC) could be shortened to take advantage of faster and more efficient sharing of information and to accelerate private creditor restructuring processes.
- Recommendation: In future cases, all relevant stakeholders, including the IMF, the World Bank, and official bilateral creditors, should work expeditiously with the debtor to ensure sufficient information is shared in a timely manner, in particular on DSAs and macroeconomic frameworks, while taking into account the specificities of each case and time for internal coordination and decision.
- Aspiration: Absent specific circumstances impeding timely decision-making, and provided sufficient information is shared early and potential concerns discussed, the proposal for the next debt restructuring case should be set as a trial example to aim for program approval within 2-3 months of SLA.

### GSDR activities, workshops, and technical work
- Engagement with credit rating agencies (CRAs) to better understand their methodologies and options for early engagement ahead of potential debt operations.
- An open GSDR workshop on climate and debt vulnerabilities focused on debt swaps and climate resilient debt clauses.
- Members underlined the importance of MDB’s financial support to countries undertaking a debt restructuring.
- GSDR Principals supported further work on:
  - An open workshop on comparability of treatment organized by the G20 Presidency and the Paris Club at the end of June.
  - Deepening coordination among stakeholders, including supporting early exchanges on DSAs and debt relief parameters.
  - Work on the use of state-contingent debt instruments (SCDIs), majority voting provisions in syndicated loans, and issues related to debt sustainability analyses and restructuring perimeters, including SOE debt and non-resident holdings of domestic debt.
  - Ways to structurally help prevent unsustainable debt build-up and address current liquidity concerns.
  - Importance of debt management, domestic resources mobilization, and robust investor/creditor-debtor relations.
  - Potential exploration of collateralized financing practices, support for debt-for-development swaps, and ways to increase debt transparency.

### Policy work and meetings since October 2023
- The G20 continued work to address debt vulnerabilities at working group, Deputies, and Finance Ministers and Central Bank Governors levels.
- The IMF and the World Bank launched the comprehensive review of the debt sustainability framework for low-income countries (LIC DSF).
  - Supplementary guidance to complement the existing 2018 LIC DSF staff guidance note is being prepared to address issues more prominent for DSAs, including domestic debt, climate considerations and the use of DSAs in debt restructurings.
  - This supplementary guidance will be ready by Summer 2024.
- GSDR Deputies met on December 18, 2023, and again on April 3, 2024, to discuss priorities and technical work.
- Two GSDR Technical Group meetings were held on February 7 and March 8, 2024:
  - The February 7 meeting included separate sessions with each of the three major CRAs to better understand methodologies and early engagement options.
  - The March 8 meeting covered comparability of treatment, restructuring timelines and predictability, and issues related to DSAs and restructuring perimeters (non-resident holdings of domestic debt and SOE debt).
- An open GSDR workshop on climate and debt vulnerabilities was held on March 4, 2024, with broad participation from GSDR members, G20 members, Paris Club members, private creditors, borrowers, MDBs, CSOs, debt experts, and advisory firms.

### Actual debt restructuring cases — advances and comparative timelines
- Ongoing restructurings progressed both under the Common Framework (CF) — Zambia and Ghana — and outside — Sri Lanka and Suriname.
- Observed timelines (dates and intervals preserved exactly as in source):
  - Chad
    - Date of SLA: January 27, 2021
    - Paris Club / OCC assurances: June 16, 2021
    - Program approval: December 10, 2021
    - AIP reached with PC or OCC: November 11, 2022
    - 1st review: December 22, 2022
    - 2nd review: December 22, 2022
    - Number of months passed between SLA & program approval: 10.5
    - Number of months passed between program approval & 1st Review: 12.4
    - Number of months passed between SLA & 1st review: 22.9
  - Zambia
    - Date of SLA: December 3, 2021
    - Paris Club / OCC assurances: July 30, 2022
    - Program approval: August 31, 2022
    - AIP reached with PC or OCC: June 22, 2023
    - 1st review: July 13, 2023
    - 2nd review: December 20, 2023
    - Number of months passed between SLA & program approval: 8.9
    - Number of months passed between program approval & 1st Review: 10.4
    - Number of months passed between SLA & 1st review: 19.3
  - Ghana
    - Date of SLA: December 12, 2022
    - Paris Club / OCC assurances: May 12, 2023
    - Program approval: May 17, 2023
    - AIP reached with PC or OCC: January 12, 2024
    - 1st review: January 19, 2024
    - Number of months passed between SLA & program approval: 5.2
    - Number of months passed between program approval & 1st Review: 8.0
    - Number of months passed between SLA & 1st review: 13.2
  - Suriname
    - Date of SLA: April 29, 2021
    - Paris Club / OCC assurances: November 30, 2021
    - Program approval: December 22, 2021
    - AIP reached with PC or OCC: June 22, 2022
    - 1st review: June 14, 2023
    - 2nd review: December 15, 2023
    - Number of months passed between SLA & program approval: 7.8
    - Number of months passed between program approval & 1st Review: 17.7
    - Number of months passed between SLA & 1st review: 25.5
    - Note: The protracted timeline for Suriname was not only owed to difficulties in the restructuring process, but other country-specific circumstances.
  - Sri Lanka
    - Date of SLA: September 1, 2022
    - Paris Club / OCC assurances: February 7, 2023
    - Program approval: March 20, 2023
    - AIP reached with PC or OCC: November 29, 2023
    - 1st review: December 12, 2023
    - Number of months passed between SLA & program approval: 6.6
    - Number of months passed between program approval & 1st Review: 8.8
    - Number of months passed between SLA & 1st review: 15.4
- Context: Recent restructuring processes of debt owed to private creditors have also taken more time than in the past, reflecting complex interactions between official bilateral and private restructuring processes, including regarding comparability of treatment, contributing to delays. Typical past timelines cited: 2-3 months between SLA and program approval, followed by 4-6 months to finalize terms of treatment and allow the first review to proceed.

*Source: GSDR Cochairs Progress Report — Executive Summary (April 17, 2024).*

### Section 2: Building Further Common Understanding on Debt

### Section 2: Building Further Common Understanding on Debt

### Vulnerabilities and Debt Restructuring Challenges — progress and remaining needs
- Further progress in actual debt restructurings and meetings/workshops advanced international debt discussions on key topics.
- Need for strengthened predictability and efficiency of restructuring processes to avoid delays that can put at risk debtor countries’ economic recovery.
- IMF assesses the envelope of debt relief needed to restore debt sustainability and prospects for successful restructuring but does not interfere in debtor-creditor negotiations or take a view on inter-creditor equity; burden sharing is for the debtor to agree with its creditors.

### Comparability of Treatment (CoT): assessment and enforcement
- Official bilateral creditors have been using an approach where CoT is:
  - Assessed using the three Common Framework criteria:
    - i. The changes in nominal debt service over the IMF program period;
    - ii. Where applicable, the debt reduction in net present value terms (NPV), using a “New NPV / Old NPV” formula and the discount rate of the LIC DSAs (currently 5 percent);
    - iii. The extension of the duration of the treated claims; and
  - Enforced via mechanisms such as claw-back clauses and/or request to remain in arrears vis-à-vis private creditors until an agreement has been found that respects CoT.
- For restructurings outside the Common Framework, similar assessment and enforcement mechanisms have been used; NPV calculations sometimes rely on two or more discount rates to ensure sensitivity analysis.
- Presence of multiple CoT parameters can make it difficult for stakeholders to understand parameter interactions and compensation across dimensions, risking delays.
- GSDR discussions reconfirmed official bilateral creditors’ intent to maintain this approach in future cases.

### Recommendations to improve CoT clarity and coordination
- Enhanced information sharing and coordination across creditor groups on CoT metrics, including expected NPV relief:
  - Official bilateral creditors should provide the debtor with clarity regarding the quantitative metrics required for CoT and the related room for maneuver.
  - Relevant information should be shared with other creditors to facilitate and accelerate restructuring.
- Timely verification of consistency with debt targets and IMF program parameters:
  - Timely information sharing on the restructuring strategy by the debtor country to IMF staff is key and should happen before any restructuring agreement is made public.
- Operational coordination expectations:
  - Official bilateral creditors should ensure timely communication of key data upon which CoT will be assessed.
  - Private creditors and the debtor should ensure that, before finalizing and announcing an agreement in principle, a verification is completed by the debtor with IMF staff on consistency with program parameters and with official bilateral creditors on CoT.
- Parallel negotiations:
  - Steps do not require a sequential process; parallel negotiations by official and private creditors are permissible and, if preferred by the debtor, should be supported.

### Restructuring timelines and predictability
- Historical timelines:
  - In the past, the process from staff level agreement (SLA) to program approval could take place within 2-3 months, with another 4-6 months to get to the Agreed Minutes and first review of program.
- Recent developments:
  - The process has become slower and more complex due to expanded discussions on procedures, perimeter, parameters, and technical aspects.
  - Encouraging signs of improvement (see Section 1 of source).
- Targets and proposals:
  - Where applicable, the timeline to form an official creditor committee (OCC) could be shortened to improve information sharing and coordination.
  - Recommendation that, absent specific circumstances impeding timely decision-making and with sufficient early information sharing, the proposal for the next debt restructuring case should be set as a trial example to aim for program approval within 2-3 months of SLA.

### DSA and restructuring perimeters — technical issues under discussion
- Ongoing discussions related to LIC DSF cases include treatment of:
  - Non-resident holders of domestic debt (NRHs).
  - State-owned enterprise (SOE) debt.
- These issues are likely to continue as part of the comprehensive review of the LIC DSF.

### Non-Resident Holders (NRHs) of domestic debt
- Emerging consensus on case-by-case treatment of NRHs in restructurings.
- Divergent views:
  - Some participants advocate including NRHs in the restructuring envelope if they are included in the DSA.
  - Others note NRHs hold instruments governed by domestic law and are intrinsically linked to authorities’ decisions on including/excluding “domestic debt” from the restructuring perimeter.
- Further discussion needed to deepen common understanding; trade-offs and country-specific scenario analysis are required.

### State-Owned Enterprise (SOE) debt
- Limited progress toward consensus on SOE debt treatment.
- Divergent views:
  - Some participants: SOE debt should be excluded from DSA and restructuring perimeters.
  - Others: SOEs are a relevant source of fiscal risk, especially in LICs, and their inclusion in the DSA perimeter in application of the current LIC DSF (with limited exceptions) is warranted.
- Confirmed flexibility: creditors and debtor can agree on a restructuring perimeter that differs from the DSA perimeter, with inevitable burden-sharing consequences.
- Issue will continue to be discussed, including in the LIC DSF review.

### Engagement with Credit Rating Agencies (CRAs)
- GSDR Technical Group meeting on February 7 improved understanding of CRA methodologies and approaches in sovereign rating assessments.
- CRAs explained criteria to classify Distressed Debt Exchanges (DDEs), focusing on reduction of value to holders relative to contractual terms and whether the exchange aims at avoiding default.
- Discussion points:
  - Rating implications of debt swaps and liquidity relief operations, including multilateral initiatives such as the G20 Debt Service Suspension Initiative (DSSI) in 2020-21.
  - CRAs clarified debt-for-nature/debt-for-development swaps treated like any debt exchange operation (which may or may not imply distress).
  - Liquidity operations assessed case-by-case depending on whether the exchange qualifies as DDE.
- Participants emphasized need for increased transparency, information sharing, and communication; CRAs noted existing extensive discussion with issuers and welcomed even closer engagement.

### Addressing climate and debt vulnerabilities
- Debt-for-nature/debt-for-development swaps:
  - Viewed as potentially useful liability management tools but generally not appropriate where debt restructuring is required.
  - Can reduce or smooth debt service and redirect resources, but are difficult to scale up, highly complex, and customized.
  - Need for careful overall cost-benefit analysis and more work to standardize and scale these instruments; diverse views on public support and emphasis on alignment with development outcomes and country priorities.
  - Need to increase transparency of documentation and governance.
- Climate Resilient Debt Clauses (CRDCs):
  - Generally viewed as useful; scaling up voluntary use was largely supported.
  - Technical issues for wider adoption were discussed; some official creditors shared successful experiences including such clauses in loans.
  - Expansion beyond hurricane events is challenging due to limited data history; ongoing work to define standard clauses for other events is promising.
  - Transparency and clarity about indicators triggering clauses are critical.

_Italic: Source — gsdr-cochairs-progress-report-april-2024 — Section 2: Building Further Common Understanding on Debt_

---


_Source: https://www.imf.org/-/media/files/miscellaneous/gsdr-cochairs-progress-report-april-2024.pdf_