Wednesday, December 17, 2008

FLASHBACK: The IMF Bankruptcy Plan

Monday, September 30, 2002

By Michael Kitchen, UN Wire

WASHINGTON -- The International Monetary Fund's top financial advisory committee voiced support Saturday for a bankruptcy structure for countries with unsustainable debt, despite concern from both the likely creditors and debtors that would be affected by such a system.

British Chancellor of the Exchequer Gordon Brown said the IMF's International Monetary and Finance Committee, which he heads, had formally asked the fund's management to draw up a "concrete proposal" on the matter, to be considered at the next IMF meeting in April 2003.

The plan to create a "sovereign debt restructuring mechanism," or SDRM, allowing insolvent debtor countries to work out a restructuring plan while receiving some protection from creditors, has drawn criticism from an association of the world's leading banking houses and financial institutions. In a letter to Brown earlier this month, the Institute of International Finance said the SDRM would encourage financially shaky nations to come "under the illusion that restructuring is a relatively attractive alternative to painful reform measures."

The group supports another measure, also endorsed by Brown's committee, that would include "collective action clauses" in loan agreements and other national debt instruments, spelling out how restructuring would work if it became necessary.

(full report)

IMF refines bankruptcy plan after creditors object
Paul Blustein, The Washington Post, January 9, 2003

WASHINGTON The International Monetary Fund, bowing to strenuous objections from banks and investors over its proposed "bankruptcy" system for indebted countries, has unveiled a proposal that omits one of the plan's most controversial features.

The IMF dropped the mechanism that would block creditors from suing to recover their money for a certain period after a country has suspended debt payments. That marks a partial retreat from proposals that were aimed at giving countries legal protections from creditors similar to those available to companies and individuals in many nations.

Some analysts said the IMF appeared to be watering down its plan in significant ways, but IMF officials said they had concluded that the "standstill" provisions were unnecessary because of other protections the plan provides to countries.

"It looks like a big change," an IMF official said Tuesday. "But it's really just a refinement."

(read full article)

IMF Meetings give go-ahead for bankruptcy plan - but on whose terms?

By Romilly Greenhill
1st October 2002

During the recent Annual Meetings of the World Bank and IMF in Washington DC, the IMF's International Monetary and Finance Committee (IMFC) agreed to continue work on an international bankruptcy plan - or 'Sovereign Debt Restructuring Mechanism' (SDRM).

The official communiqué - the statement issued by IMFC members at the end of their meeting - called on the IMF to 'consider the issues further and to develop, for consideration at its next meeting, a concrete proposal for a statutory sovereign debt restructuring mechanism to be considered by the membership .'

(read full article)

A trader reading a Bible in a Sao Paulo session
A trader reads the Bible as Brazil's currency plunges

The BBC's Andrew Walker

The debt problems of Argentina and Brazil have loomed large over the annual meetings of the International Monetary Fund and the World Bank.

Finance chiefs have made some progress on ideas for how to prevent countries suffering all the economic consequences of a chaotic default on debts owed to the private sector.

The second-in-command at the IMF, Anne Krueger, has put together some outline proposals for a new system that is sometimes likened to a bankruptcy process for countries.

Using the language of American company insolvency law, it is sometimes called a "sovereign Chapter 11".

The finance ministers gathered here have given Ms Krueger and her colleagues instructions to come up with something more concrete by the time they next meet in April 2003.

(read full article)