## Introduction

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---

### Background and context
- March 1989: U.S. Treasury Secretary Nicholas Brady announced a plan for distressed sovereigns to restructure unsustainable debts via issuance of “Brady bonds.”
- Key inducements for creditor participation:
  - Collateralized interest and principal payments of Brady bonds (zero-coupon U.S. Treasury securities for principal; high-grade investment securities for interest, purchased with IMF program augmentation and set asides).
  - Debtors’ commitments to economic reform under IMF programs and World Bank engagement.
  - Enhanced liquidity of restructured claims through tradable securities.
- Historical magnitudes and timing:
  - Total stock of outstanding bank lending to Latin America rose from about $30 billion in 1970 to $330 billion in 1982.
  - First Brady restructuring: Mexico, February 1990; restructured about $54,300 (USD millions) — "about 19 percent of Mexico’s 1990 GDP" — and included a 13.1% face value reduction. Time to settlement: 14 months.
  - Seventeen countries undertook Brady restructurings 1990–1998.
  - Average face value reduction of all Brady restructurings was about 22 percent of GDP worth of restructured debt (Asonuma & Trebesch, 2016).
  - Brady restructurings had average time to settlement of about 6 years (longer than average duration of debt restructurings 1978–2020 of about 3 years).
- Typical exchange features:
  - Case-by-case restructurings, tailored menu of options.
  - Two primary options: par bond exchanges and discount bond exchanges.
    - Upfront cash payment usually between 7 to 13 percent of principal and interest of original debt.
    - Par bonds: face value preserved, lower fixed interest.
    - Discount bonds: face value reductions about 30-35 percent, variable interest.
  - Credit enhancements: zero-coupon collateral and IFI-supported rolling interest guarantees.
  - Liquidity enhancement: conversion of illiquid loans into tradable securities; opened access to new institutional investors.

### Empirical approach and data
- Research question: How did the original Brady Plan deliver on debt relief and growth, and through which mechanisms?
- Samples:
  - Sample of 50 EMDEs for the empirical analysis.
  - Analytical sample for main regressions: 10 Brady countries — Argentina, Brazil, Costa Rica, Dominican Republic, Ecuador, Jordan, Mexico, Nigeria, Peru, and the Philippines.
  - Control group: 17 countries that received non-Brady restructurings (1970–2013) and 23 EMDEs that did not seek debt treatments.
- Methods:
  - Non-staggered and staggered differences-in-differences (DiD) specifications.
    - Baseline DiD specification: y_it = β·brady_i × post_t + γ_i + γ_t + ε_it, where post_t = 1 in 1999 and 0 in 1989.
  - Synthetic control method (SCM) as robustness check; SCM constructs weighted counterfactuals matching pre-treatment characteristics (pre-treatment period 1981–1989).
  - Growth decomposition using Cobb-Douglas production function:
    - Δln Y_t = Δln TFP_t + (α/(1−α)) Δln k_t + Δln h_t + Δln(L_t/P_t) + Δln P_t.
  - Debt decomposition:
    - d_t − d_{t−1} = −relief_t − (g_t/(1+g_t)) d_{t−1} + residual.

### Key empirical findings
- Public and external debt:
  - In the decade following the first Brady deal, public debt levels of Brady countries dropped by 20 percentage points of GDP relative to non-Brady countries.
  - Average external debt burdens of Brady countries fell by roughly 25 percentage points relative to the control group in the following decade.
- Growth, inflation, and output:
  - Pre-Brady (decade prior to first debt relief): Brady countries’ real GDP growth averaged 1.5 percent per year; non-Brady countries averaged more than 3 percent.
  - Post-Brady (1990s): Brady countries’ growth more than doubled to 3.4 percent.
  - In 1999, output of Brady countries was 26 percent higher relative to their pre-restructuring trend.
  - Inflation: mean of the annual growth rate of Brady countries’ output deflator peaked at a mean of 600 in 1989; median peaked at 30 percent in 1992. By 1999, both mean and median inflation rates of the Brady group had fallen below the control group.
- Trade, FDI, and net resources:
  - Trade openness: Brady countries’ openness increased back to 40 percent in 1990, 10 percentage points above the control group.
  - FDI stock (share of external liabilities): between 1989 and 1999, share of FDI in external liabilities increased by 13 percentage points for Brady countries — more than double the increase relative to the control group.
  - Net investment income rose substantially: increased by close to 3 percentage points of GDP in 1997 relative to 1989 for Brady countries.
- Productivity and growth drivers:
  - The pick-up in growth largely followed from total factor productivity (TFP) growth: TFP growth increased by 2.5 percentage points per year in the decade after the first Brady deal.
  - Capital deepening contributed negatively to growth in Brady countries over this period.
- Brady multiplier on debt reduction:
  - Average face value reduction of a Brady deal was 3.3 percent of 1999 GDP.
  - With public debt levels 20 percentage points lower in 1999 relative to the control group, implied “Brady multiplier” ≈ 6 times the initial face value reduction. More than half of this effect is accounted for by increased output growth.
- Structural reforms and policy performance:
  - Brady countries undertook more ambitious structural reforms than non-Brady restructurers (e.g., product market reforms, financial deepening on domestic and external finance).
  - Brady countries tended to meet more IMF program quantitative targets relative to non-Brady peers (higher quality macroeconomic policymaking).
- Robustness:
  - DiD baseline results confirmed by SCM and staggered DiD analyses.
  - SCM shows more favorable outcomes for Brady restructurers vs. synthetic controls on public debt, external debt, real GDP growth, inflation, trade openness, and FDI stock.
  - Staggered DiD shows some improvement in years running up to Brady exchanges (possible announcement/confidence effects or prior reforms).

### Discussion, caveats, and policy implications
- Interpretation cautions:
  - Results show correlation between Brady deals and favorable macroeconomic outcomes, but cannot clearly identify which specific elements (face value haircuts, pre-Brady reforms, UCT-quality IMF programs, regained market access, or macro conditions of the 1990s) were decisive.
  - Possible complementary channels: face value reductions proximate to debt stock declines; IMF/World Bank-anchored reforms contributing to higher TFP growth.
- When Brady-style mechanisms can be useful:
  - Helpful when solvency challenges are acute and when the downside risk of under-providing relief (Type II error) outweighs over-providing relief (Type I error).
  - Historically effective under conditions present in Brady period: debtors with prior market access; large commercial bank exposures; creditors seeking capacity-to-repay assurances via policy adjustment and collateralization; illiquid claims benefiting from securitization; debtors willing to undertake strong structural reforms; creditor willingness to provide substantial face value relief.
- Limitations and constraints:
  - Brady-style restructurings require conditions that many debt-vulnerable countries today do not meet: many are low-income countries (LICs) with external debt held largely by official creditors, weaker institutional capacity, domestic debt reliance, and different creditor constellations.
  - Brady period benefited from strong global economic growth and favorable commodity price outlooks in the 1990s.
  - Operational/legal and political economy constraints remain (e.g., creditor coordination, domestic legal constraints on converting claims, need for credible reform implementation).
- Policy takeaway:
  - Debt relief efforts coupled with ambitious structural reforms and IMF/World Bank engagement can maximize benefits of restructuring and face value haircuts.
  - Brady-style mechanisms could be one useful tool in a larger toolkit for sovereign debt restructuring, but would need adaptation to contemporary creditor mixes and debtor characteristics.

### Conclusions and future research directions
- Debt reduction and macroeconomic dividends:
  - Brady-style exchanges produced significant and persistent declines in public and external debt for Brady restructurers relative to the control group.
  - Brady restructurers experienced broadly better macroeconomic outcomes, including faster growth, relative to the non-Brady control group.
  - The ‘multiplier’ effect of face value reductions on debt burdens of Brady countries was particularly large, making a Brady-style mechanism an effective tool for debt relief.
- Liquidity, marketability, and creditor diversification:
  - The Brady Plan converted illiquid and non-transparent claims into marketable securities, providing liquidity benefits for creditors and debtors.
  - Brady exchanges diversified the sovereign creditor base away from commercial banks toward capital markets.
  - Typical 1980s–1990s Brady features included a securitized fixed income stream at about 6.25% (coupon often less than prevailing rate), and enhancements such as:
    - Par exchange transaction: Principal prepayment and up to 12% of remaining interest; securitized with a fixed income stream at about 6.25% or less.
    - Discount exchange transaction: Principal prepayment and up to 13% of remaining interest; securitized with a floating interest stream at LIBOR + 13/16 plus 30-35% face value haircut.
    - Temporary interest reduction exchange: Prepayment of up to 10% of remaining interest; securitized with a submarket fixed income stream for first 5-6 years, then floating rate of LIBOR + 13/16 and amortization of principal.
    - Debt conversion/new money: New loans equal to about 20% of the existing exposure of creditors; securitized with interest of LIBOR + 7/8 and amortization of principal repayments.
- Policy commitments and structural reform:
  - Policy commitments implemented through the Brady Plan fostered macroeconomic sustainability and helped safeguard reform momentum among debtors.
  - Empirical results indicate Brady restructurings were associated with a sharp pick-up in productivity growth, likely anchored by strong structural reform efforts in the 1990s.
  - IMF programs and macroeconomic stabilization programs likely served as commitment devices for Brady restructurers to undertake difficult reforms.
- Future research directions:
  - Examine why the Brady Plan was relatively more successful than other debt relief initiatives and use complementary analytical methods.
  - Compare the Brady Plan with HIPC, Multilateral Debt Relief Initiative, and the Vienna Initiative.
  - Disambiguate the relative weights of drivers of favorable macroeconomic outcomes in Brady restructurers (debt relief vs. institutional quality and reforms).
  - Extend political-economy analysis to understand why structural reforms were stronger in Brady countries; obtain more granularity on types and quality of structural reforms.
  - Employ different empirical methods, including permutation-based inference and weight caps in SCM calculations; use more case studies for granularity.
  - Assess how Brady exchanges can complement existing debt restructuring mechanisms; consider incorporation into multilateral frameworks if there is demand from creditors and debtors.
  - Perform granular assessments of debt vulnerabilities and map modalities to potential qualification in a rebooted Brady Plan.
  - Evaluate how today’s more shock-prone and uncertain global conditions may affect implementation and incentives of creditors, debtors, and sponsors for a new Brady-style mechanism.

### Indicative proposals for a 2020s Brady-style menu (other authors)
- Buchheit and Lerrick (2023) — Cash down-payment structure:
  - Investors receive 30-35% up front of the bond’s current market value.
  - 3-3.5% interest rate with 25-30 year maturity, amortization of original principal due in final 3 years.
- Buchheit and Lerrick (2023) — Floor of support structure:
  - Collateralized with a zero-coupon World Bank bond.
  - New bond initial value of 60-70% of current market value, minimum value rising to 100% of nominal amount at maturity; 3-3.5% interest rate with 35-40 year maturity.
- Coulibaly and Abedin (2023) — Recovery and Sustainability bonds (RSBs):
  - RSBs have preferred creditor status and are collateralized by zero-coupon bonds issued by, for example, the World Bank.
  - 30% haircut on outstanding private external debt; RSBs have 5% coupon rate with 30-year maturities, with fully amortized principal.
- Qian (2021) — IFI or sovereign guarantee:
  - IFI guarantees principal and interest rate of collateralized borrowing structure.
  - Restructured bonds have haircuts and SCDI (e.g., commodity)-linked features.

*Source: IMF Working Paper — Introduction and Conclusions from "How the Brady Plan Delivered on Debt Relief: Lessons and Implications," Working Paper No. WP/2023/258 (wpiea2023258-print-pdf).*

### Introduction ...........................................................................................................

### Introduction

### Scope and structure
- The document includes the following major sections with their starting pages:
  - Introduction ......................................................................................................................................................... 5
  - Background on the Brady Plan .......................................................................................................................... 7
  - Analyzing the Impact of the Brady Plan .......................................................................................................... 12
  - Sample and sources ..................................................................................................................................... 12
  - Methodology ................................................................................................................................................. 15
  - Results ......................................................................................................................................................... 18
  - Robustness checks ...................................................................................................................................... 24
  - Discussion ......................................................................................................................................................... 29
  - Conclusions ....................................................................................................................................................... 31
  - Annex 1. Detailed Regression Results ............................................................................................................ 33
  - Annex II. Brady Options ................................................................................................................................... 37
  - References ......................................................................................................................................................... 39

### Key components listed (figures and tables)
- Figures (numbered and titled as listed):
  - Figure 1. Brady Restructurings in Historical Context (1980-2013)
  - Figure 2. Evolution of Public and External Debt Following the First Brady Deal (1980-1999)
  - Figure 3. Evolution of Output and Inflation Following the First Brady Deal (1980-1999)
  - Figure 4. The Evolution of Trade and FDI Following the First Brady Deal (1980-1999)
  - Figure 5. The Evolution of Current Accounts Following the First Brady Deal (1980-1999)
  - Figure 6. Drivers of Output and Public Debt Growth Following First Brady Deal
  - Figure 7. Reforms in Brady Restructurers vs. Comparators
  - Figure 8. IMF Program Performance in Brady Restructurers vs. Comparators
  - Figure 9. Evolution of Macroeconomic Outcomes Following the First Brady Deal (1980-1999, SCM)
  - Figure 10. Evolution of Macroeconomic Outcomes Following the Brady Deals (DiD)
  - Figure 12. Managing Tradeoffs in Debt Restructuring Given Uncertainty

- Tables (numbered and titled as listed):
  - Table 1: Brady Restructurings
  - Table 2: Variables and Data Sources
  - Table 3: Sample of Countries
  - Table 4: Selected Summary Statistics
  - Table 5: Country Weights of Synthetic Controls for Gross Public Debt
  - Annex Table 1: Average Treatment Effects, Differences-in-Differences Regressions
  - Annex Table 2: Average Treatment Effects, Differences-in-Differences Regressions, Staggered

### Glossary (selected acronyms as listed)
- AE - Advanced economy
- DDSRO - Debt- and debt-service reduction operation
- DiD - Difference-in-differences
- EM - Emerging market
- EMDE - Emerging markets and developing economy
- HIPC - Heavily Indebted Poor Country Initiative
- IDA - International Development Association
- IFI - International financial institution
- IMF - International Monetary Fund
- LIC - Low-income country
- MONA - Monitoring of Fund Arrangements database
- MYRA - Multi-year rescheduling agreements
- NPC - Negative pledge clause
- NPV - Net-present value
- OSI - Official sector involvement
- PRGT - IMF’s Poverty Reduction and Growth Trust
- PWT - Penn World Table
- QPC - Quantitative performance criteria (IMF programs)
- RSBs - Recovery and Sustainability Bonds
- SCDI - State-contingent debt instrument
- SCM - Synthetic control method
- TFP - Total factor productivity
- UCT - Upper-credit tranche

*IMF WORKING PAPERS How the Brady Plan Delivered on Debt Relief: Lessons and Implications — Introduction (pages and contents as listed in source)*

### Introduction

### Introduction

### Background and context
- March 1989: U.S. Treasury Secretary Nicholas Brady announced a plan for distressed sovereigns to restructure unsustainable debts via issuance of “Brady bonds.”
- Key inducements for creditor participation:
  - Collateralized interest and principal payments of Brady bonds (zero-coupon U.S. Treasury securities for principal; high-grade investment securities for interest, purchased with IMF program augmentation and set asides).
  - Debtors’ commitments to economic reform under IMF programs and World Bank engagement.
  - Enhanced liquidity of restructured claims through tradable securities.
- Historical context and magnitudes:
  - Total stock of outstanding bank lending to Latin America rose from about $30 billion in 1970 to $330 billion in 1982.
  - First Brady restructuring: Mexico, February 1990; restructured about $54,300 (USD millions) — "about 19 percent of Mexico’s 1990 GDP" — and included a 13.1% face value reduction. Time to settlement: 14 months.
  - Seventeen countries undertook Brady restructurings 1990–1998 (Table 1). Average face value reduction of all Brady restructurings was about 22 percent of GDP worth of restructured debt (Asonuma & Trebesch, 2016).
  - Brady restructurings had average time to settlement of about 6 years (longer than average duration of debt restructurings 1978–2020 of about 3 years).
- Typical Brady exchange features:
  - Case-by-case restructurings, tailored menu of options.
  - Two primary options: par bond exchanges and discount bond exchanges.
    - Upfront cash payment usually between 7 to 13 percent of principal and interest of original debt.
    - Par bonds: face value preserved, lower fixed interest.
    - Discount bonds: face value reductions about 30-35 percent, variable interest.
  - Credit enhancements: zero-coupon collateral and IFI-supported rolling interest guarantees.
  - Liquidity enhancement: conversion of illiquid loans into tradable securities; opened access to new institutional investors.

### Empirical approach and data
- Research question: How did the original Brady Plan deliver on debt relief and growth, and through which mechanisms?
- Sample and data:
  - Sample of 50 EMDEs for the empirical analysis.
  - Analytical sample for main regressions: 10 Brady countries with available data — Argentina, Brazil, Costa Rica, Dominican Republic, Ecuador, Jordan, Mexico, Nigeria, Peru, and the Philippines.
  - Control group: 17 countries that received non-Brady restructurings (1970–2013) and 23 EMDEs that did not seek debt treatments.
- Methods:
  - Non-staggered and staggered differences-in-differences (DiD) specifications.
    - Baseline DiD specification: y_it = β·brady_i × post_t + γ_i + γ_t + ε_it, where post_t = 1 in 1999 and 0 in 1989.
  - Synthetic control method (SCM) as robustness check; SCM constructs weighted counterfactuals matching pre-treatment characteristics (pre-treatment period 1981–1989).
  - Growth decomposition using Cobb-Douglas production function:
    - Δln Y_t = Δln TFP_t + (α/(1−α)) Δln k_t + Δln h_t + Δln(L_t/P_t) + Δln P_t.
  - Debt decomposition:
    - d_t − d_{t−1} = −relief_t − (g_t/(1+g_t)) d_{t−1} + residual.

### Key empirical findings
- Public and external debt:
  - In the decade following the first Brady deal, public debt levels of Brady countries dropped by 20 percentage points of GDP relative to non-Brady countries.
  - Average external debt burdens of Brady countries fell by roughly 25 percentage points relative to the control group in the following decade.
- Growth, inflation, and output:
  - Pre-Brady (decade prior to first debt relief): Brady countries’ real GDP growth averaged 1.5 percent per year; non-Brady countries averaged more than 3 percent.
  - Post-Brady (1990s): Brady countries’ growth more than doubled to 3.4 percent.
  - In 1999, output of Brady countries was 26 percent higher relative to their pre-restructuring trend.
  - Inflation: mean of the annual growth rate of Brady countries’ output deflator peaked at a mean of 600 in 1989; median peaked at 30 percent in 1992. By 1999, both mean and median inflation rates of the Brady group had fallen below the control group.
- Trade, FDI, and net resources:
  - Trade openness: Brady countries’ openness increased back to 40 percent in 1990, 10 percentage points above the control group.
  - FDI stock (share of external liabilities): between 1989 and 1999, share of FDI in external liabilities increased by 13 percentage points for Brady countries — more than double the increase relative to the control group.
  - Net investment income rose substantially: increased by close to 3 percentage points of GDP in 1997 relative to 1989 for Brady countries.
- Productivity and growth drivers:
  - The pick-up in growth largely followed from total factor productivity (TFP) growth: TFP growth increased by 2.5 percentage points per year in the decade after the first Brady deal.
  - Capital deepening contributed negatively to growth in Brady countries over this period.
- Brady multiplier on debt reduction:
  - Average face value reduction of a Brady deal was 3.3 percent of 1999 GDP.
  - With public debt levels 20 percentage points lower in 1999 relative to the control group, implied “Brady multiplier” ≈ 6 times the initial face value reduction. More than half of this effect is accounted for by increased output growth.
- Structural reforms and policy performance:
  - Brady countries undertook more ambitious structural reforms than non-Brady restructurers (e.g., product market reforms, financial deepening on domestic and external finance).
  - Brady countries tended to meet more IMF program quantitative targets relative to non-Brady peers (higher quality macroeconomic policymaking).
- Robustness and confirmation:
  - DiD baseline results confirmed by SCM and staggered DiD analyses.
  - SCM shows more favorable outcomes for Brady restructurers vs. synthetic controls on public debt, external debt, real GDP growth, inflation, trade openness, and FDI stock.
  - Staggered DiD shows some improvement in years running up to Brady exchanges (possible announcement/confidence effects or prior reforms).

### Discussion, caveats, and implications for policy
- Interpretation cautions:
  - Results show correlation between Brady deals and favorable macroeconomic outcomes, but cannot clearly identify which specific elements (face value haircuts, pre-Brady reforms, UCT-quality IMF programs, regained market access, or macro conditions of the 1990s) were decisive.
  - Possible complementary channels: face value reductions proximate to debt stock declines; IMF/World Bank-anchored reforms contributing to higher TFP growth.
- When Brady-style mechanisms can be useful:
  - Helpful when solvency challenges are acute and when the downside risk of under-providing relief (Type II error) outweighs over-providing relief (Type I error).
  - Historically effective under conditions present in Brady period: debtors with prior market access; large commercial bank exposures; creditors seeking capacity-to-repay assurances via policy adjustment and collateralization; illiquid claims benefiting from securitization; debtors willing to undertake strong structural reforms; creditor willingness to provide substantial face value relief.
- Limitations and why not a panacea today:
  - Brady-style restructurings require conditions that many debt-vulnerable countries today do not meet: many are low-income countries (LICs) with external debt held largely by official creditors, weaker institutional capacity, domestic debt reliance, and different creditor constellations.
  - Brady period benefited from strong global economic growth and favorable commodity price outlooks in the 1990s.
  - Operational/legal and political economy constraints remain (e.g., creditor coordination, domestic legal constraints on converting claims, need for credible reform implementation).
- Policy takeaway:
  - Debt relief efforts coupled with ambitious structural reforms and IMF/World Bank engagement can maximize benefits of restructuring and face value haircuts.
  - Brady-style mechanisms could be one useful tool in a larger toolkit for sovereign debt restructuring, but would need adaptation to contemporary creditor mixes and debtor characteristics.

*Source: IMF Working Paper — Introduction (wpiea2023258-print-pdf - Introduction).*

### Conclusions

### Conclusions

### Debt reduction and macroeconomic dividends
- Brady-style exchanges produced significant and persistent declines in public and external debt for Brady restructurers relative to the control group.
- Brady restructurers experienced broadly better macroeconomic outcomes, including faster growth, relative to the non-Brady control group.
- The ‘multiplier’ effect of face value reductions on debt burdens of Brady countries was particularly large, making a Brady-style mechanism an effective tool for debt relief.
- These results are consistent with recent research, including International Monetary Fund (2023) and Ando, Asonuma, Mishra, and Sollaci (2023).
- Brady restructurings combined write-downs and reforms to deliver better outcomes than cases without similar treatments.

### Liquidity, marketability, and creditor diversification
- The Brady Plan converted illiquid and non-transparent claims into marketable securities, providing liquidity benefits for creditors and debtors.
- Brady exchanges diversified the sovereign creditor base away from commercial banks toward capital markets, where active buying and selling occurred in the restructured claims.
- A key benefit of the original Brady Plan was strengthening liquidity of restructured claims while reducing creditor concentration.
- Brady bonds opened new categories of institutional investors attracted by relatively higher returns and the safety of collateralized structures.
- Typical 1980s–1990s Brady features included a securitized fixed income stream at about 6.25% (coupon often less than prevailing rate), and enhancements such as:
  - Buyback: Up-front cash payment (N/A for restructured obligations).
  - Par exchange transaction: Principal prepayment and up to 12% of remaining interest; securitized with a fixed income stream at about 6.25% or less.
  - Discount exchange transaction: Principal prepayment and up to 13% of remaining interest; securitized with a floating interest stream at LIBOR + 13/16 plus 30-35% face value haircut.
  - Temporary interest reduction exchange: Prepayment of up to 10% of remaining interest; securitized with a submarket fixed income stream for first 5-6 years, then floating rate of LIBOR + 13/16 and amortization of principal.
  - Debt conversion/new money: New loans equal to about 20% of the existing exposure of creditors; securitized with interest of LIBOR + 7/8 and amortization of principal repayments.

### Policy commitments, IMF programs, and structural reform
- Policy commitments implemented through the Brady Plan fostered macroeconomic sustainability and helped safeguard reform momentum among debtors.
- Empirical results indicate Brady restructurings were associated with a sharp pick-up in productivity growth, likely anchored by strong structural reform efforts in the 1990s.
- IMF programs and macroeconomic stabilization programs likely served as commitment devices for Brady restructurers to undertake difficult reforms.
- Overall, Brady restructurers’ structural reform effort was stronger than peer countries.

### Future research directions and considerations for a modern Brady-style mechanism
- Examine why the Brady Plan was relatively more successful than other debt relief initiatives and use complementary analytical methods.
- Compare the Brady Plan with HIPC, Multilateral Debt Relief Initiative, and the Vienna Initiative.
- Disambiguate the relative weights of drivers of favorable macroeconomic outcomes in Brady restructurers (debt relief vs. institutional quality and reforms).
- Extend political-economy analysis to understand why structural reforms were stronger in Brady countries; obtain more granularity on types and quality of structural reforms.
- Employ different empirical methods, including permutation-based inference and weight caps in SCM calculations; use more case studies for granularity.
- Assess how Brady exchanges can complement existing debt restructuring mechanisms; consider incorporation into multilateral frameworks if there is demand from creditors and debtors.
- Perform granular assessments of debt vulnerabilities and map modalities to potential qualification in a rebooted Brady Plan.
- Evaluate how today’s more shock-prone and uncertain global conditions may affect implementation and incentives of creditors, debtors, and sponsors for a new Brady-style mechanism.

### Indicative proposals for a 2020s Brady-style menu (other authors)
- Buchheit and Lerrick (2023) — Cash down-payment structure:
  - Investors receive 30-35% up front of the bond’s current market value.
  - 3-3.5% interest rate with 25-30 year maturity, amortization of original principal due in final 3 years.
- Buchheit and Lerrick (2023) — Floor of support structure:
  - Collateralized with a zero-coupon World Bank bond.
  - New bond initial value of 60-70% of current market value, minimum value rising to 100% of nominal amount at maturity; 3-3.5% interest rate with 35-40 year maturity.
- Coulibaly and Abedin (2023) — Recovery and Sustainability bonds (RSBs):
  - RSBs have preferred creditor status and are collateralized by zero-coupon bonds issued by, for example, the World Bank.
  - 30% haircut on outstanding private external debt; RSBs have 5% coupon rate with 30-year maturities, with fully amortized principal.
- Qian (2021) — IFI or sovereign guarantee:
  - IFI guarantees principal and interest rate of collateralized borrowing structure.
  - Restructured bonds have haircuts and SCDI (e.g., commodity)-linked features.

*Source: Conclusions (and accompanying annexes) from "How the Brady Plan Delivered on Debt Relief: Lessons and Implications," Working Paper No. WP/2023/258.*

---


_Source: https://www.imf.org/-/media/files/publications/wp/2023/english/wpiea2023258-print-pdf.pdf_