March 24, 2025 | Today I shared my views (slides here) at a Global Sovereign Debt Roundtable (GSDR) workshop on the use of State-Contingent Debt Instruments (SCDIs) in cross-border borrowing by emerging market sovereigns. These securities index bond payments to various conditions and can helpfully provide borrowers with insurance, potentially reducing the likelihood of restructurings and defaults. There have been a number of previous cases where SCDIs were suboptimally designed, so healthy skepticism is warranted. But this does not preclude their improvement in the future. I believe the official sector should be more supportive of SCDIs than it currently is and should look to remove obstacles to their use.
