For instance, the debt statement referred to above reports a total of US$1.67 was used to pay maturing principal repayments. Typically, the mechanisms available for a debt restructuring are an extension of maturity duration, reorganisation of the debt composition or debt-to-equity swaps. First, there currently lacks clear rules and sovereign debt restructuring framework that countries can adapt to navigate this painful process. Second, geographically dispersed creditors and bondholders have incentives to hold out from debt restructuring deals that make the negotiations very difficult. Finally, most countries try to postpone the beginning of a difficult, yet unavoidable debt restructuring process.

Source: Daily Nation July 28, 2023 21:05 UTC