WASHINGTON: The mechanisms allowing a country to restructure its sovereign debt should be “reviewed” if Argentina defaults, IMF chief Christine Lagarde said.
If that happens, “the debt restructuring principles and the efficiency” of collective-action clauses “will have to be reviewed,” said Lagarde, Managing Director of the International Monetary Fund, at a news conference in Washington.
Collective-action clauses —including when a government issues bonds — traditionally allow a majority of creditors to agree to a debt restructuring when the country is facing a crisis.
Lagarde added that the Fund was monitoring the situation and analysing the potential consequences of a default.
Argentina used collective-action clauses to deal with its 2001 default on close to $100bn in debt, which plunged the country into an economic crisis it is still battling to overcome.
AFP
