Trade Dynamics in Sovereign Debt Crises

IMF Working Papers, November 14, 2025

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Sovereign debt restructurings can have large impacts on trade, with a significant compression of imports and a more ambiguous effect on exports.
The magnitude of trade impacts depends on timing:
- Restructurings that preempt a default have different trade outcomes than restructurings that take place after payments have been missed.
- Post-default restructurings are associated with longer and deeper crises.
Import compression is significantly higher following post-default restructurings.
Post-default restructurings also tend to be associated with higher exports relative to preemptive restructurings, consistent with the need for a larger external adjustment following a default.
The effect of restructurings on trade varies across types of goods.
The trade impact is larger when initial aggregate domestic demand in the debtor’s economy is high.

Subject areas: Asset and liability management, Debt restructuring, Exports, Imports, International trade, Public debt, Sovereign debt restructuring.
Keywords: Aipw estimation; Debt restructuring; Domestic Aggregate Demand; Export; Exports; Global; IMF working papers; Imports; Primary Commodity; Sovereign Debt; Sovereign Debt Restructuring; Sovereign Default; Trade; trade datum; trade dynamics.