Tuesday, August 11, 2015

Way to Restructure Soveriegn Debt of Crisis Ridden Countries

Charles Goodhart in his recent article in Financial Times provides an innovative solution to the Debt Crisis of the troubled economies. He proposes to convert Debt into Equity. Idea is not very unique if this was the case of any corporate. But the idea of a sovereign issuing equity is really unique and out of box.
What Goodhart proposes is that the existing sovereign debt be converted into GDP indexed bonds. Like equity, bond holders will not receive any return till the economy has not turnaround. Once the economy has turned around, the bondholders will get returns. This will ensure effective participation of creditor countries, future returns will be fair to the taxpayers of creditor countries and will also not burden the troubled economies with the debt servicing during the turnaround.


No comments:

Post a Comment

Blog Archive

About Me

My photo
Vasant Vihar, New Delhi, India
A Central Banker with 22+ years of experience. Interested in latest developments in Indian Economy and Banking. Certified Trainer with 5+ years of experience in classroom training. VIEWS EXPRESSED ARE PURELY PERSONAL