Theo Maret
@theomaret.bsky.social
Sovereign Debt • Emerging Markets • Own views • 🚲
Today is my last day at GSA after 5 exciting years – I’m most grateful for all the discussions and friends made along the way.
I won’t be posting much going forward but please reach out if you want to talk sovereign debt & emerging markets! 🇱🇰🇿🇲
I won’t be posting much going forward but please reach out if you want to talk sovereign debt & emerging markets! 🇱🇰🇿🇲
November 29, 2024 at 3:43 PM
Today is my last day at GSA after 5 exciting years – I’m most grateful for all the discussions and friends made along the way.
I won’t be posting much going forward but please reach out if you want to talk sovereign debt & emerging markets! 🇱🇰🇿🇲
I won’t be posting much going forward but please reach out if you want to talk sovereign debt & emerging markets! 🇱🇰🇿🇲
As a reminder, this debate could be linked to Bloomberg reporting which mentioned that the US Treasury was criticizing the ambition of the IMF/WB “three pillar approach” to liquidity pressures in LICs
www.bloomberg.com/news/article...
www.bloomberg.com/news/article...
November 22, 2024 at 5:44 PM
As a reminder, this debate could be linked to Bloomberg reporting which mentioned that the US Treasury was criticizing the ambition of the IMF/WB “three pillar approach” to liquidity pressures in LICs
www.bloomberg.com/news/article...
www.bloomberg.com/news/article...
Appendix X sums up the IMF's doctrine on SCDIs, with a mention of the ex ante vs ex post assessment of CoT and the required buffers to accomodate clawbacks in the second case -- a debate which came up recently in Suriname and Sri Lanka
November 20, 2024 at 10:08 AM
Appendix X sums up the IMF's doctrine on SCDIs, with a mention of the ex ante vs ex post assessment of CoT and the required buffers to accomodate clawbacks in the second case -- a debate which came up recently in Suriname and Sri Lanka
Interesting discussion of the IMF's reluctance to have debt treatments/instruments linked to IMF conditions -- echoes the design of Zambia's Bond B (linked to the IMF's debt carrying capacity) or the non-restructuring case of El Salvador's macro-linked securities
November 20, 2024 at 10:08 AM
Interesting discussion of the IMF's reluctance to have debt treatments/instruments linked to IMF conditions -- echoes the design of Zambia's Bond B (linked to the IMF's debt carrying capacity) or the non-restructuring case of El Salvador's macro-linked securities
Reminder of the IMF's indirect stance on burden sharing: the non-respect of CoT would threaten the involvement of official creditors (e.g. because of a clawback) and hence hamper the return to debt sustainability
November 20, 2024 at 10:08 AM
Reminder of the IMF's indirect stance on burden sharing: the non-respect of CoT would threaten the involvement of official creditors (e.g. because of a clawback) and hence hamper the return to debt sustainability
The IMF confirms its reluctance to adjust debt targets ex post, but opens the door to such adjustments in exceptional circumstances -- a problem in recent cases is that the rigidity of debt targets has been compensated by adjustments of the macro framework (e.g. NRH in Zambia)
November 20, 2024 at 10:08 AM
The IMF confirms its reluctance to adjust debt targets ex post, but opens the door to such adjustments in exceptional circumstances -- a problem in recent cases is that the rigidity of debt targets has been compensated by adjustments of the macro framework (e.g. NRH in Zambia)
Neat overview of how debt targets are defined in restructuring cases -- would be good to have more details about how they're defined in cases based on the MAC SRDSF, after the recent debates in Sri lanka
November 20, 2024 at 10:08 AM
Neat overview of how debt targets are defined in restructuring cases -- would be good to have more details about how they're defined in cases based on the MAC SRDSF, after the recent debates in Sri lanka
These few paragraphs are especially important when thinking about the role of the IMF in recent borderline cases like Kenya or Pakistan
November 20, 2024 at 10:08 AM
These few paragraphs are especially important when thinking about the role of the IMF in recent borderline cases like Kenya or Pakistan
Interesting discussion on the impossibility for the IMF to "require" a restructuring, in order to avoid legal risks related to tortious interference in private contracts -- a legal oddity that came up recently in the money time of Zambia's restructuring negotiations
November 20, 2024 at 10:08 AM
Interesting discussion on the impossibility for the IMF to "require" a restructuring, in order to avoid legal risks related to tortious interference in private contracts -- a legal oddity that came up recently in the money time of Zambia's restructuring negotiations
Similar to official creditors, the IMF can seek further assurances from commercial creditors with collateral, since debtor countries are unable to gain leverage in negotiations by running arrears to them -- see Chad 2021 with Glencore
November 20, 2024 at 10:08 AM
Similar to official creditors, the IMF can seek further assurances from commercial creditors with collateral, since debtor countries are unable to gain leverage in negotiations by running arrears to them -- see Chad 2021 with Glencore
The IMF clarifies that a country can require more debt relief than implied by IMF program parameters without breaching the "good faith" requirement, but IMF staff might then judge that a restructuring is less likely to happen -- echoes recent debates in e.g. Sri lanka
November 20, 2024 at 10:08 AM
The IMF clarifies that a country can require more debt relief than implied by IMF program parameters without breaching the "good faith" requirement, but IMF staff might then judge that a restructuring is less likely to happen -- echoes recent debates in e.g. Sri lanka
When creditor committees are formed, the IMF would expect the debtor to engage with them under certain conditions, e.g. when they have blocking stakes or represent different geographies and instruments
November 20, 2024 at 10:08 AM
When creditor committees are formed, the IMF would expect the debtor to engage with them under certain conditions, e.g. when they have blocking stakes or represent different geographies and instruments
Neat decision tree for the classification of claims between the different arrears policies
November 20, 2024 at 10:08 AM
Neat decision tree for the classification of claims between the different arrears policies
Useful clarification: the classification of claims for the purpose of the arrears policies does not determine the treatment in a restructuring -- a misconception that has been especially acute when it comes to the treatment of plurilaterals in recent cases
November 20, 2024 at 10:08 AM
Useful clarification: the classification of claims for the purpose of the arrears policies does not determine the treatment in a restructuring -- a misconception that has been especially acute when it comes to the treatment of plurilaterals in recent cases
Interestingly the definition for this leverage of specific creditors encompasses collateral but also broader BoP relationships: the IMF is wary of a bilateral creditor leveraging trade measures to seek better repayment terms on its debt claims
November 20, 2024 at 10:08 AM
Interestingly the definition for this leverage of specific creditors encompasses collateral but also broader BoP relationships: the IMF is wary of a bilateral creditor leveraging trade measures to seek better repayment terms on its debt claims
The IMF will only need assurances from bilateral creditors representing 50% of the required contribution, but then reserves the right to seek further assurances from creditors "with influence over the debtor" -- a debate that arose with e.g. China or plurilaterals in recent cases
November 20, 2024 at 10:08 AM
The IMF will only need assurances from bilateral creditors representing 50% of the required contribution, but then reserves the right to seek further assurances from creditors "with influence over the debtor" -- a debate that arose with e.g. China or plurilaterals in recent cases
2 subtelties:
- Assessment depends on the type of treatment, e.g. China has a track record for reschedulings, less so for deep NPV reduction
- Mechanisms like the PC and CF can remove the requirement for individual assurances (that's how the IMF approved the Ethiopia program)
- Assessment depends on the type of treatment, e.g. China has a track record for reschedulings, less so for deep NPV reduction
- Mechanisms like the PC and CF can remove the requirement for individual assurances (that's how the IMF approved the Ethiopia program)
November 20, 2024 at 10:08 AM
2 subtelties:
- Assessment depends on the type of treatment, e.g. China has a track record for reschedulings, less so for deep NPV reduction
- Mechanisms like the PC and CF can remove the requirement for individual assurances (that's how the IMF approved the Ethiopia program)
- Assessment depends on the type of treatment, e.g. China has a track record for reschedulings, less so for deep NPV reduction
- Mechanisms like the PC and CF can remove the requirement for individual assurances (that's how the IMF approved the Ethiopia program)
Neat overview of the "Credible Official Creditor Process" in restructuring contexts. It was notably designed to overcome the fragmented institutional landscape of China's overseas lending, with no institution able to provide unified assurances and enforce them on all the lenders
November 20, 2024 at 10:08 AM
Neat overview of the "Credible Official Creditor Process" in restructuring contexts. It was notably designed to overcome the fragmented institutional landscape of China's overseas lending, with no institution able to provide unified assurances and enforce them on all the lenders
On financing assurances from official creditors:
- Can consist in project finance or equity investments
- IMF staff can engage directly with creditors, and assurances don't have to be in written format
- IMF staff will look at net BoP impact, e.g. netting out import components
- Can consist in project finance or equity investments
- IMF staff can engage directly with creditors, and assurances don't have to be in written format
- IMF staff will look at net BoP impact, e.g. netting out import components
November 20, 2024 at 10:08 AM
On financing assurances from official creditors:
- Can consist in project finance or equity investments
- IMF staff can engage directly with creditors, and assurances don't have to be in written format
- IMF staff will look at net BoP impact, e.g. netting out import components
- Can consist in project finance or equity investments
- IMF staff can engage directly with creditors, and assurances don't have to be in written format
- IMF staff will look at net BoP impact, e.g. netting out import components
Discussion of how IMF staff should assess the likelihood of market access: a contentious topic e.g. with Ecuador's recent IMF program which assumes $1.5bn in Eurobond issuance next year despite difficult market conditions
November 20, 2024 at 10:08 AM
Discussion of how IMF staff should assess the likelihood of market access: a contentious topic e.g. with Ecuador's recent IMF program which assumes $1.5bn in Eurobond issuance next year despite difficult market conditions
Somewhat confusing sentence on the interlink between domestic and external debt sustainability, and the fiscal impact of domestic restructurings
November 20, 2024 at 10:08 AM
Somewhat confusing sentence on the interlink between domestic and external debt sustainability, and the fiscal impact of domestic restructurings
In the original version of the DSA, there were barely $400m of cash flows available for *all* restructured debts, including Eurobonds and Chinese loans, in 2024 and 2025 combined — the payments on the new bonds alone now appear to be over $700m for these two years
2/3
2/3
November 19, 2024 at 5:37 PM
In the original version of the DSA, there were barely $400m of cash flows available for *all* restructured debts, including Eurobonds and Chinese loans, in 2024 and 2025 combined — the payments on the new bonds alone now appear to be over $700m for these two years
2/3
2/3
Zambia’s Eurobond restructuring deal indicates that ~25% of the $2bn base bond would amortize in 2024-2025 during the IMF program, on top of 5.75% coupon paid in cash — this seems to imply that the IMF modified the DSA significantly from the first iteration
1/3
1/3
November 19, 2024 at 5:37 PM
Zambia’s Eurobond restructuring deal indicates that ~25% of the $2bn base bond would amortize in 2024-2025 during the IMF program, on top of 5.75% coupon paid in cash — this seems to imply that the IMF modified the DSA significantly from the first iteration
1/3
1/3
As Brent notes this approach is not a first-best and entails some risks, but risks worth taking when looking at the impact of delays in supporting countries in debt distress
It would also formalize and clarify the trend observed on an ad hoc basis in Suriname or Sri Lanka
4/4
It would also formalize and clarify the trend observed on an ad hoc basis in Suriname or Sri Lanka
4/4
November 19, 2024 at 5:37 PM
As Brent notes this approach is not a first-best and entails some risks, but risks worth taking when looking at the impact of delays in supporting countries in debt distress
It would also formalize and clarify the trend observed on an ad hoc basis in Suriname or Sri Lanka
4/4
It would also formalize and clarify the trend observed on an ad hoc basis in Suriname or Sri Lanka
4/4
The proposed reform seems pragmatic, combining a commitment to non-payment from the debtor, and some form of claw back — we mentioned something similar with Brad Setser in a FTAV piece
www.ft.com/content/304e...
2/4
www.ft.com/content/304e...
2/4
November 19, 2024 at 5:37 PM
The proposed reform seems pragmatic, combining a commitment to non-payment from the debtor, and some form of claw back — we mentioned something similar with Brad Setser in a FTAV piece
www.ft.com/content/304e...
2/4
www.ft.com/content/304e...
2/4