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International Monetary Fund. Western Hemisphere Dept.

framework that covers incremental risk and damage for a range of disaster intensities. The layered buffers include risk retention mechanisms, particularly self-insurance in the form of a contingency fund, risk transfer mechanisms such as Catastrophe Risk Insurance Facility (CCRIF) cover, the World Bank’s CAT-DDO, the hurricane clause for debt service, and private sector insurance mechanisms. In September 2019, the Government of Grenada approved the DRFS together with a corresponding implementation plan. 23. Progress has been made in putting in place some specific

Mr. Tamon Asonuma, Xin Li, Mr. Michael G. Papaioannou, and Mr. Saji Thomas

Implications of the Debt Restructurings C. Fiscal Consolidation and Debt Sustainability D. Financing during the Debt Restructurings VI. Lessons Learned VII. Conclusion References Boxes 1. Collective Action Clause and Exit Consent 2. Hurricane Clause and Citizenship by Investment Program Revenue Sharing Clause in the Exchange Offer in the 2013–15 Restructuring 3. Too Little, Too Late? Figures 1: Grenada’s Public Debt, June 2004 2. Grenada’s Private Debt Restructuring, 2004–06: NPV Haircuts 3. Grenada’s Private Debt Restructuring, 2004–06: Debt

Mr. Tamon Asonuma, Xin Li, Mr. Michael G. Papaioannou, and Mr. Saji Thomas
This paper documents the two debt restructurings that Grenada undertook in 2004–06 and 2013–15.Both restructurings emerged as a consequence of weak fiscal and debt situations, whichbecame unsustainable soon after external shocks hit the island economy. The two restructurings provided liquidity relief, with the second one involving a principal haircut. However, the first restructuring was not able to secure long-term debt sustainability. Grenada’s restructuring experience shows the importance of (1) establishing appropriate debt restructuring objectives; (2) committing to policy reforms and maintaining ownership of the restructuring goals; and (3) engaging closely and having clear communications with creditors.
International Monetary Fund
These annexes accompany the IMF Policy Paper State Contingent Debt Instruments for Sovereigns
International Monetary Fund. Western Hemisphere Dept.
The Bahamas is experiencing a tourism-led rebound. Real GDP growth in 2021 was close to 14 percent, as stayover tourist arrivals doubled relative to 2020. The economy is projected to expand by 8 percent in 2022. Nonetheless, it will likely take until 2024 to return to the 2019 level of GDP and the pandemic has given rise to significant human and social costs. The country’s medium-term growth challenges are likely worse than before, and public finances are in a more precarious state. Risks are skewed downwards given a difficult near-term financing situation, rising inflationary—and potentially BOP—pressures because of the war in Ukraine, an ongoing threat from the evolving pandemic, and the country’s high vulnerability to natural disasters.
Charles Cohen, S. M. Ali Abbas, Anthony Myrvin, Tom Best, Mr. Peter Breuer, Hui Miao, Ms. Alla Myrvoda, and Eriko Togo
The COVID-19 crisis may lead to a series of costly and inefficient sovereign debt restructurings. Any such restructurings will likely take place during a period of great economic uncertainty, which may lead to protracted negotiations between creditors and debtors over recovery values, and potentially even relapses into default post-restructuring. State-contingent debt instruments (SCDIs) could play an important role in improving the outcomes of these restructurings.
International Monetary Fund
Background. The case for sovereign state-contingent debt instruments (SCDIs) as a countercyclical and risk-sharing tool has been around for some time and remains appealing; but take-up has been limited. Earlier staff work had advocated the use of growth-indexed bonds in emerging markets and contingent financial instruments in low-income countries. In light of recent renewed interest among academics, policymakers, and market participants—staff has analyzed the conceptual and practical issues SCDIs raise with a view to accelerate the development of self-sustaining markets in these instruments. The analysis has benefited from broad consultations with both private market participants and policymakers. The economic case for SCDIs. By linking debt service to a measure of the sovereign’s capacity to pay, SCDIs can increase fiscal space, and thus allow greater policy flexibility in bad times. They can also broaden the sovereign’s investor base, open opportunities for risk diversification for investors, and enhance the resilience of the international financial system. Should SCDI issuance rise to account for a large share of public debt, it could also significantly reduce the incidence and cost of sovereign debt crises. Some potential complications require mitigation: a high novelty and liquidity premium demanded by investors in the early stage of market development; adverse selection and moral hazard risks; undesirable pricing effects on conventional debt; pro-cyclical investor demand; migration of excessive risk to the private sector; and adverse political economy incentives.