3 failure to discharge due liability or

The better than expected cash position resulted from additional voluntary contributions received, interest income earned, savings on prior period obligations as well as delays in the liquidation of current period obligations.

In an environment of zero or near zero interest rates, creditors have an incentive to extend and pretend that is, roll over their maturing debt, so that they can keep their problems hidden for longer. Because the debt can be refinanced at such low rates, rollover risk is very low, allowing debtors who would be considered insolvent under normal circumstances to carry on much longer than they otherwise could.

Holders of both state and federal bonds were thus offered a basket of long dated bonds, some with an interest rate of 3 , and others with 6 (with a ten year grace period). The basket was designed in such a way as to result in an average debt service cost of 4 .

This obligation expired 31 12 2004 and no further provision has been made.

In such a situation, the only option available for the Government was to seek debt restructuring to alleviate the debt burden or to have short term cash flow relief.

Recognizing that commodity prices are an important element for heavily indebted poor countries that are commodity dependent in maintaining long term debt sustainability,

The mechanics of debt restructuring are straightforward. Governments can offer a menu of new bonds worth some fraction of the value of their existing obligations.

Governments can offer a menu of new bonds worth some fraction of the value of their existing obligations. Bondholders can be given a choice between par bonds with a face value equal to their existing bonds but a longer maturity and lower interest rate, and discount bonds with a shorter maturity and higher interest rate but a face value that is a fraction of existing bonds face value.

The issue was not only the aggregate level of debt it was also a question of balance between private and public sector debt, their maturity structure, the level of contingent liabilities, reserve management and pursuit of macroeconomic policies consistent with development objectives.

Therefore, only current maturities and arrears were treated, and an agreement was reached that the consolidated amounts would be reimbursed over a period of 14 years, including a grace period of three years.

We welcome the initiative of the finance ministers of the Group of Eight to cancel the debt of 18 heavily indebted poor countries. We hope to see further debt relief for other heavily indebted countries so that financial resources can be released to meet urgent development needs.

In November 2002, China wrote off all the mature debts totalling 9.607 million owed to it by Afghanistan.

Long term sustainability of debt depends mainly on the growth and export prospects of debtor countries.

Noting with concern the continuing debt and debt servicing problems of heavily indebted developing countries as constituting an element that adversely affects their development efforts and economic growth, and stressing the importance of alleviating once and for all, where applicable, their onerous debt and debt service burden with the aim of attaining a sustainable level of debt and debt service,

As Daniel Gros recently pointed out, debt that can be rolled over indefinitely at zero interest rates is no debt at all. This is an extreme example but the closer a fixed interest rate gets to zero, and the longer the maturity becomes, the lower the burden of the stock of debt.

Bond holders are to receive 456 million in bonds due in 2011 (with the same coupon of 9.5 per cent) and 574 million in bonds due in 2018 (with the same coupon of 9.04 per cent).

Recognizing that commodity prices are an important element for heavily indebted poor countries that are dependent on commodities for maintaining long term debt sustainability,

And that is just the first two years. The budget cost increases every year, as more of the debt rolls over 160 and that does not include agency debt and the large increase in the current account deficit to pay China, Japan, and other foreign holders of US debt.

And that is just the first two years. The budget cost increases every year, as more of the debt rolls over and that does not include agency debt and the large increase in the current account deficit to pay China, Japan, and other foreign holders of US debt.

(h) Savings on or cancellation of obligations from the prior biennium

23. Recognizes the difficulties of heavily indebted middle income developing countries in meeting their external debt and debt servicing obligations, and notes the worsening situation in some of them in the context, inter alia, of greater liquidity constraints, which may require debt treatment through various national and international measures designed to assist those countries to make their debt burden sustainable in the long term and to combat poverty effectively

In other words, investors are expecting to receive only about half of what they are owed. The hope is that the reduction in borrowing costs on new loans, plus the austerity programs promised by governments, will enable bond prices to recover to par without the need for the creditor banks to take a hit.

In October 2003, Paris Club creditors agreed on the Evian approach to deal with the debt of non HIPC low income and middle income countries, taking into account not only the financing gaps but also the medium term debt sustainability of these countries.

13. Encourages the Paris Club, in dealing with the debt of low and middle income debtor countries that are not part of the Heavily Indebted Poor Countries Initiative, to take into account their medium term debt sustainability in addition to their financing gaps, and takes note with appreciation of the Evian approach of the Paris Club in providing terms of debt relief tailored to the specific needs of debtor countries while preserving debt cancellation for heavily indebted poor countries

15. Encourages the Paris Club, in dealing with the debt of low and middle income debtor countries that are not part of the Heavily Indebted Poor Countries Initiative to take into account their medium term debt sustainability in addition to their financing gaps, and takes note with appreciation of the Evian approach of the Paris Club in providing terms of debt relief tailored to the specific needs of debtor countries while preserving debt cancellation for heavily indebted poor countries

In the current situation, the US cannot reduce the real value of its government debt significantly by indulging in a bout of inflation, because the average maturity on existing debt is very short only about four years. And the projected fiscal deficits imply that the additional debt that will be issued during the next decade will be as large as the total stock of debt today.

For starters, when it comes to public debt, there is a big difference between the gross and net figures. While Japan s gross public debt, for example, is a massive 246 of GDP, the net figure, accounting for intra government debts, is 127 of GDP.

Or because of a temporary shortfall in exports, or a temporary lack of access to foreign lending, or a bunching of debt maturities?

Review, reobligation and cancellation of obligations

However, a goodwill clause was included in the final agreement, stipulating that creditors were ready to review Gabon's debt situation in 2005.

26. Recognizes the difficulties faced by heavily indebted middle income developing countries in meeting their external debt and debt servicing obligations, and notes the worsening situation in some of them in the context, inter alia, of greater liquidity constraints, which may require debt treatment through various national and international measures designed to assist those countries in making their debt burden sustainable in the long term and in combating poverty effectively

Sovereign Debt at Square One

In addition to estimating financing gaps and identifying the sources of financing (including different scenarios of debt rescheduling), DSA includes an analysis of debt dynamics to determine the stability of debt to GDP or debt to government revenue ratios.

To address the debt burden problem, many African countries at first resorted to repeated debt rescheduling which focused on debt service flows, resulting in steadily increasing debt stocks and related service payments.

The capacity of developing countries to manage the maturity structure and currency composition of debt needs further improvement.

Once it became clear that the burden was unbearable, debt should have been cut expeditiously. Too many creditors were reimbursed at par on their maturing claims.

We welcome the cancellation of the debt of the most heavily indebted poor countries, but we believe that a long term solution of the debt problem of developing countries should not obstruct investment.

The value of innovative sources of financing for development had been recognized and agreement had been reached on considering additional measures to ensure long term debt sustainability through increased grant based financing, cancellation of the official multilateral and bilateral debt of Heavily Indebted Poor Countries, and debt relief or restructuring for low income and middle income developing countries with unsustainable debt burdens.

The ECB will service (as opposed to purchase) a portion of every maturing government bond corresponding to the percentage of the member state s public debt that is allowed by the Maastricht rules. Thus, in the case of member states with debt to GDP ratios of, say, 120 and 90 , the ECB would service, respectively, 50 and 66.7 of every maturing government bond.

2. The debtor may raise against the assignee any other right of set off, provided that it was available to the debtor at the time notification of the assignment was received by the debtor.

IMF requested that the Government desist from repaying any debt until the entire quantum of debt is determined and rescheduled and the repayments are prioritized. (See table 7.

Total debt relief accorded to the 27 countries that have reached either the decision point or the completion point, together with other debt relief measures, represents a two thirds reduction in these countries' overall debt stock.

This amount consists of savings on the cancellation of obligations from the prior biennium of 3,287,665 less 9,891 exchange loss on liquidation of prior biennium IDDA obligations.

Back in 2003, partly in response to the Argentine crisis, the IMF proposed a new framework for adjudicating sovereign debts. But the proposal faced sharp opposition not only from creditors who feared that the IMF would be too friendly to problem debtors, but also from emerging markets that foresaw no near term risk to their perceived creditworthiness.