Group of Trustees of the Principles Underscore the Importance of Public-Private Dialogue to Address Sovereign Debt Strains in Emerging and Developing Economies

October 14, 2022

With the global economy facing challenges on inflation and growth, the members of the Group of Trustees of the Principles for Stable Capital Flows and Fair Debt Restructuring met for their annual review of progress on implementation of the Principles—a key element of the international sovereign debt architecture. 

Following the meeting, co-Chairs François Villeroy de Galhau, Governor, Banque de France; Prof. Dr. Axel A. Weber, Outgoing Chairman of the Board, Institute of International Finance; and Dr. Yi Gang, Governor, People's Bank of China issued the following statement:

“As geopolitical tensions, tightening global financial conditions, and higher food and energy prices loom over the global economy, emerging and developing economies are facing a more precarious outlook amid ever-heavier debt servicing burdens and pervasive climate vulnerability. In the pursuit of adequate policies to address these challenges, never has the need been greater for public-private sector cooperation and dialogue through forums such as the Group of Trustees of the Principles for Stable Capital Flows and Fair Debt Restructuring. As stakeholders continue their efforts to improve the international sovereign debt architecture, frequent and open communication among official, multilateral, and private creditors as well as borrowing countries is indispensable, as highlighted in the Principles themselves.”

In this context, the Trustees congratulate the members of the Principles Consultative Group, which includes senior officials from emerging and mature market economies as well as senior bankers, investors, and sovereign debt experts, on the update of the Principles for Stable Capital Flows and Fair Debt Restructuring. The updates reflect the IIF’s Voluntary Principles for Debt Transparency and their implementation through the IIF-OECD Debt Transparency Initiative’s data repository. Given the transformative potential of Environmental, Social and Governance (ESG) investment in supporting stable capital flows and sustainable development goals, the updated Principles underscore the importance of integrating ESG considerations in borrowing countries’ policy frameworks, alongside enhanced debt transparency and reporting—including verifiable impact assessment. 

The Trustees discussed the 2022 Report on the Implementation of the Principles and noted that in the absence of a widely acknowledged international mechanism for sovereign debt workouts involving the private sector, the Principles continue to offer an effective market-based framework for debt crisis prevention and resolution.

The Trustees also discussed developments regarding implementation of the G20 Common Framework on Debt Treatments as well as the significant progress made by the Private Sector Debt Working Group (convened by the UK Treasury with the support of IMF staff) on specimen majority voting clauses and advancing climate resilient debt instruments, as well as potential solutions for debt distress in Sri Lanka and Ukraine.