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Assessment of Debt Restructuring Operations in Commonwealth Small States

image of Assessment of Debt Restructuring Operations in Commonwealth Small States

An increase in external shocks, international terrorism and natural disasters over the past two decades has led to unsustainable debt burdens in small and vulnerable states, resulting in debt restructuring programmes.

This paper highlights the concerns of Commonwealth small states about their growing debt burden and the emerging challenges to their overall debt sustainability. It pinpoints the factors that lead to debt, the hurdles involved with debt restructuring and the weaknesses involved in debt management. It offers key lessons learned based on the experiences of seven small Commonwealth countries that have restructured their debts: Antigua and Barbuda, Belize, Dominica, Grenada, Jamaica, St Kitts and Nevis, and Seychelles.

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Factors Leading to Debt Restructuring Operations in the Commonwealth-7

Debt restructuring operations in the Commonwealth-7 over the period 2010–2013 were the culmination of chronically high and rising public debt and unsustainable debt burdens, which were the result, in turn, of weak and deteriorating external and financial positions and a marked downturn in economic activity for most of the decade. External shocks have been a principal factor in the deteriorating external and fiscal imbalances over the period, but so too have the macroeconomic policies pursued by many governments within the Commonwealth-7. Exacerbating these factors have been country-specific shocks, such as banking collapses, and risky structures in some debt portfolios, both of which have contributed to the worsening situation in these countries.

English

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