Sovereign Debt Restructurings in Belize: Achievements and Challenges Ahead
IMF Working Papers, July 22, 2014
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- Sovereign Debt Restructurings in Belize: Achievements and Challenges Ahead
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Bibliographic details
- Authors: Tamon Asonuma, Gerardo Peraza, Kristine Vitola, Takahiro Tsuda
- Published: July 22, 2014
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781498369510.001
Summary and principal finding
- Examines causes, processes, and outcomes of two Belize sovereign debt restructurings in 2006–07 and in 2012–13 that occurred outside of an IMF-supported program.
- Finds that motivations differed: 2006–07 driven by external liquidity concerns; 2012–13 motivated by a substantial increase in the coupon rates and future fiscal solvency concerns.
- Both restructurings were executed through collaborative engagement despite differential treatment between residents and non-residents, aided by a broad-based creditor committee and the authorities’ effective communication strategy.
- Neither restructuring properly addressed long-term debt sustainability concerns; they provided temporary liquidity relief but did not resolve sustainability.
- The success of the 2012–13 debt restructuring will depend on the country’s ability to strengthen fiscal efforts and public debt management framework.
Causes and motivations
- 2006–07: external liquidity concerns.
- 2012–13: substantial increase in coupon rates and future fiscal solvency concerns.
Process, creditor engagement, and execution
- Both 2006–07 and 2012–13 debt exchanges involved collaborative engagement.
- Contributing factors to successful engagement:
- Existence of a broad-based creditor committee.
- Authorities’ effective communication strategy.
- Noted differential treatment between residents and non-residents during exchanges.
Outcomes and assessment
- Immediate outcome: temporary liquidity relief for Belize.
- Longer-term outcome: neither restructuring properly addressed long-term debt sustainability concerns.
- Ongoing dependency: durability of 2012–13 restructuring outcomes hinges on fiscal consolidation and public debt management reforms.
Policy implications and recommendations (going forward)
- Strengthen fiscal efforts.
- Strengthen public debt management framework.
- Continued attention to debt sustainability beyond liquidity-focused measures.
Subject classifications and keywords
- Subject: Asset and liability management, Bonds, Debt restructuring, Debt service, External debt, Financial institutions, Public debt
- Keywords: amortizing bond, Belize, Belize debt restructuring, bond, bond exchange, Bonds, cash flow, debt exchange, debt exchange operation, Debt restructuring, Debt service, debt sustainability concern, deficit, exchange offer, External Debt, Global, growth performance, Inter-Creditor Equity, market financing, market haircut, Sovereign Debt Restructuring, step-up coupon, WP
Content in this bundle
- Belize Debt Restructuring, 2006–07: Indicative Scenarios