Imf Moots New Debt Recast Plan

The International Monetary Fund (IMF) has proposed a new mechanism to help creditors recover money from countries facing a debt default.

Called the Sovereign Debt Restructuring Mechanism (SDRM), it would allow majority of creditors to bind a dissenting minority to the terms of a restructuring agreement to ensure that they can recover their money.

The issues have become important for the international financial community as countries are increasingly raising debt from private parties in addition to commercial banks. But faced with possible default like in East Asia and Argentina recently the creditors have had to write off sizable debts.

The new mechanism would also include a stay on creditor litigation after suspension of payments, but before a restructuring agreement is reached; safeguards for protecting creditor interests and a mechanism to allow for provision of new money by private creditors during the stay.

 

The IMF will be submitting it