State Contingent Debt Instruments (SCDIs)

• 28 Oct 2024

Source: TH

The Global Sovereign Debt Roundtable (GSDR), which addresses challenges in debt restructuring processes, is set to discuss State Contingent Debt Instruments (SCDIs). 

• SCDIs: 
  • It helps speed up debt restructuring by offering bonds with payouts contingent on countries meeting specific economic or fiscal targets.  
    • E.g., GDP-linked bonds issued by Ukraine that are tied to economic growth. 
  • They do not have a fixed interest rate.  
    • Payout structure varies depending on economic growth, natural resource revenue, or tax receipts. 
  • SCDIs act as “deal accelerators,” especially in cases where there are fundamental disagreements about a country's economic outlook. 
• GSDR: 
  • GSDR, which is co-chaired by the IMF, World Bank, and the G20 Presidency (currently Brazil), started functioning in 2023. 
  • It comprises official bilateral creditors (both traditional creditors members of the Paris Club and new creditors), private creditors and borrowing countries. 
    • The Paris Club (1956) is an informal group of creditor countries that work together to support nations facing financial difficulties, chiefly those struggling to pay off debts.

Read More: UN Report on Global Debt Crisis