9/ .. little nervous. Markets will be telling. A bond rally would signal optimism: "Key positions are filled, negotiations can begin" A price drop reflect fears about reduced IMF program probability and increased expected losses for bondholders, when banks walk away with more.

8/ One can hope though that the prospect of a legacy as the man who cleaned up the mess will have some appeal. One thing is certain already though: Lebanon's restructuring fundamentally involves distributing incurred losses. A zero sum game, likely leaving bond holders a ...

7/ It is exactly those connections that have also raised concerns about his proximity to the banks. Which could impact potential IMF program negotiations and the distribution of financial losses across creditors. For a summary of that view, see: www.lorientlejour.com/article/1453...

6/ How to learn more about Souaid's views then? I'd suggest checking his LinkedIn or speaking to those who know him. linkedin.com/in/karim-sou... Apparent consensus: He's highly qualified and exceptionally well-connected both in Lebanon and internationally.

5/ Some interest groups claim the report suggests wiping out 90% of deposits. That’s False. The report's proposed mechanism would protect most depositors, with potential losses concentrated across large deposits. Souaid's views on this? Unclear.

4/ Take gold reserves mentioned by the FT: The report never advocates for selling those. Net reserves are negative, and the gold covers but a tiny fraction of liabilities. Plus: a failed 2022 audit even raised serious questions about the actual gold stock's size.

3/ While Souaid's team shared their views/expertise and helped with data access, they did not influence the analysis or findings. Meaning the report might align with some of his perspectives, but certainly not all.

2/ Many have thus reached out and asked about Souaid's views in relation to our 2023 policy paper mentioned in yesterday’s FT. ft.com/content/4453... Let me clarify: The Harvard Growth Lab’s research outputs are independent.

Bottom line: The sovereign debt system remains highly adaptable. New challenges often trigger an evolution of restructuring approaches, to maintain the system in equilibrium. Where despite the lack of enforcement, lenders lend and sovereigns can borrow. 7/7
#InternationalFinance #SovereignDebt

With a focus on legal aspects, the paper provides a birds-eye overview on a range of topic:
1. Historical evolution of debt restructurings
2. Current landscape
3. Evolving legal frameworks
4. Latest innovations (Climate Resilient Debt Clauses, state-contingent instruments) 6/7

Other than for the generalist sovdebt-nerd, we hope the chapter will prove insightful to policymakers, sovereign debt practitioners, researchers studying international finance and development economists at large. 5/7

Despite it being a textbook chapter, it is also a timely contribution given current challenges:
1. Rise of non-traditional bilateral creditors (esp. China)
2. Implementation struggles of G20 Common Framework
3. Climate-related debt innovations etc. 4/7

The numbers clearly support this: Despite major changes over centuries in technology (from carrier pigeons to emails) & restructuring mechanisms (from gunboat diplomacy to CACs), the statistical distribution of creditor losses has remained remarkably stable 3/7

In the chapter, we review how sovereign debt crises are resolved in practice, arguing that the so-called "financial architecture" is better viewed as furniture - flexible & constantly rearranged to suit the times and uphold the same equilibrium. 2/7