The Outlook for Broader Systemic Reform

Abstract

AbstractChapter 8 discusses the outlook for broader systemic reform and concludes the book. The chapter argues that by clarifying the content and scope of core intercreditor equity rights and obligations applicable in the context of sovereign debt restructuring, the book may contribute to easing the level of conflict in future sovereign debt restructuring and improving the chances of achieving sustainable debt restructuring. It also suggests that the book should be read as cautioning against the shortcomings of the ad hoc contract-based regulatory framework governing sovereign debt and a call for reform. The increase of unsustainable debt burdens across many jurisdictions in the wake of the COVID-19 pandemic and the lack of effective debt crisis resolution measures is one example of how the current regulatory framework is flawed. Although there is a growing consensus that the current system of sovereign debt restructurings has several flaws, there is no corresponding agreement on how it should be improved. Resistance to reform of the legal framework governing sovereign debt is particularly strong with respect to initiatives that go beyond a voluntary contractual approach, especially in jurisdictions of economic importance. This resistance lacks justification. Important progress on the regulatory framework governing sovereign borrowing and lending has already been made by institutions such as the IMF, the United Nations Conference on Trade and Development, the United Nations Department of Economic and Social Affairs, and the UN General Assembly. Future reform should build on and learn from these processes.