Group of Seven Action Plan

• Pages: 128

Page 128

We, the Group of Seven finance ministers and central bank governors, have today adopted an integrated Action Plan to increase predictability and reduce uncertainty about official policy actions in the emerging markets. The Action Plan is part of an overall endeavor whereby the sovereign debt of all countries would ultimately be investment grade, a rating that every country could eventually achieve with the right policies. The Action Plan would help prevent financial crises and better resolve them when they occur, thereby creating the conditions for sustained growth of private investment in emerging markets and helping raise living standards of the people in emerging market countries.We pledge to work together to carry out this Action Plan. The plan comprises the following elements that are complementary and reinforce each other.

We will work with emerging market countries and their creditors to implement a market-oriented approach to the sovereign debt restructuring process, in which new contingency clauses would be incorporated into debt contracts.

These new clauses should describe as precisely as possible what would happen in the event of a sovereign debt restructuring.

The clauses should include supermajority decisionmaking by creditors; a process by which a sovereign would initiate a restructuring or rescheduling-including a cooling-off, or standstill, period-and a description of how creditors would engage with borrowers.Within these parameters, we will work with borrowers and creditors to make the clauses as effective as possible, examining such issues as aggregation, new private lending, and treatment of existing debt.We will also work with the IMF on incentives for countries with IMF programs to adopt such clauses.

With this market-oriented approach to the sovereign debt restructuring...