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The Debt Problem Is Enormous. Experts Say the System for Fixing It Is Broken [1]
['Patricia Cohen', 'More About Patricia Cohen']
Date: 2023-12-16
Zambia defaulted on its external debt three years ago, and there is still no agreement because the I.M.F., China and bondholders are at odds.
There’s a “big hole” in international governance when it comes to sovereign debt, said Paola Subacchi, an economist at the Global Policy Institute at Queen Mary University in London, because the rules don’t apply to private loans, whether from a hedge fund or China’s central bank. Often these creditors have an interest in drawing out the process to hold out for a better deal.
Mr. Guzman and other economists have called for an international legal arbiter to adjudicate disputes related to sovereign debt.
“Every country has adopted a bankruptcy law,” said Joseph Stiglitz, a former chief economist at the World Bank, “but internationally we don’t have one.”
The United States, though, has repeatedly opposed the idea, saying it is unnecessary.
Rescues, too, have proved to be problematic. Last-resort loans from the I.M.F. can end up adding to a country’s budgetary woes and undermining the economic recovery because interest rates are so high now, and borrowers must also pay hefty fees.
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[1] Url:
https://www.nytimes.com/2023/12/16/business/economy/imf-world-bank-sovereign-debt.html
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