## Restructuring Domestic Sovereign Debt: An Analytical Illustration

_IMF Working Papers, February 3, 2023_

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## Bibliographic details
- Authors: David A. Grigorian
- Published: February 3, 2023
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798400232541.001

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### Summary
- Sovereign domestic debt restructurings have become more common in recent years and touched upon a growing share of total public debt.
- The paper offers a simple framework for policymakers to evaluate whether to restructure domestic sovereign debt as part of efforts to reduce overall public indebtedness.
- It highlights a wide range of technical, legal, and operational issues a sovereign may face while restructuring domestic debt.
- Key inputs into the restructuring decision include:
  - debt reduction required to achieve sustainability,
  - fiscal savings from a restructuring,
  - economic costs of a restructuring,
  - composition of debt,
  - financial stability costs,
  - crisis preparedness.

### Key findings and analytical framework
- Presents a simple decision framework for policymakers considering domestic sovereign debt restructuring.
- Emphasizes that while fiscal arithmetic (debt reduction and fiscal savings) is central, non-quantitative factors (debt composition, financial stability implications, crisis preparedness) materially affect the decision.
- Highlights the range of technical, legal, and operational challenges that can arise in domestic restructurings and the importance of accounting for these in policy design.

### Factors for policymakers to weigh
- Debt reduction required to achieve sustainability.
- Fiscal savings from restructuring operations.
- Economic costs associated with restructuring.
- Composition of debt (domestic vs. external, instrument types).
- Financial stability costs and systemic risk considerations.
- Crisis preparedness and operational readiness to implement restructurings.

### Technical, legal, and operational issues (as discussed in the paper)
- A wide range of issues may arise, including:
  - technical design of restructuring instruments and exchanges,
  - legal frameworks governing domestic debt and creditor rights,
  - operational capacity to execute restructurings, and
  - interaction with financial sector stability and macroeconomic policy.

### Publication and metadata
- Author: David A. Grigorian
- Date: February 3, 2023
- Series: Working Paper No. 2023/024
- Volume: 2023
- Issue: 024
- Pages: 29
- DOI: https://doi.org/10.5089/9798400232541.001
- Stock No: WPIEA2023024
- ISBN: 9798400232541
- ISSN: 1018-5941
- Subjects: Asset and liability management; Debt relief; Debt restructuring; Domestic debt; Public debt; Sovereign debt restructuring
- Keywords: DDR Laffer Curve; Debt relief; debt relief calculation; debt relief target; Debt restructuring; Domestic debt; Domestic debt restructuring; Europe; net debt relief; restructuring Laffer Curve; sovereign debt; Sovereign debt restructuring

*IMF Working Paper — Restructuring Domestic Sovereign Debt: An Analytical Illustration (David A. Grigorian, February 3, 2023).*

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_Source: https://www.imf.org/en/publications/wp/issues/2023/02/03/restructuring-domestic-sovereign-debt-an-analytical-illustration-529112_