IMF Working Papers

Restructuring Sovereign Domestic Debt in Developing Countries

By Eriko Togo, Hui Miao, Myrvin L Anthony, Marie S Kim, Joe Kogan, Shijia Luo

October 3, 2025

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Format: Chicago

Eriko Togo, Hui Miao, Myrvin L Anthony, Marie S Kim, Joe Kogan, and Shijia Luo. "Restructuring Sovereign Domestic Debt in Developing Countries", IMF Working Papers 2025, 202 (2025), accessed October 4, 2025, https://doi.org/10.5089/9798229028158.001

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

Amid rising domestic sovereign debt overhang in some emerging and developing economies (EMDEs), this paper underscores the importance of effective domestic sovereign debt restructuring (DDR) strategies where a DDR is deemed necessary. The paper suggests that delayed responses to, or inaction on, rising domestic debt vulnerabilities can be costly, highlighting the importance of assessing the intertemporal tradeoff between short-term costs from a DDR and achieving long-term economic resilience. Drawing on case studies, practical guidance is provided for designing and executing a DDR, tailored to country-specific circumstances and constraints, to minimize risks to financial stability and domestic debt market dysfunction. Restructuring alone does not ensure success. A comprehensive macroeconomic adjustment program addressing the root cause of debt accumulation—while distributing the burden among creditors, implementing fiscal adjustment, and securing support from the international financial community anchored by an IMF arrangement—will enhance the chance of a successful DDR outcome.

Subject: Asset and liability management, Bonds, Commercial banks, Debt restructuring, Domestic debt, External debt, Financial institutions, Financial sector policy and analysis, Financial sector stability, Government securities, Public debt, Sovereign debt restructuring, Treasury bills and bonds

Keywords: Argentina, Bonds, Commercial banks, Debt Relief, Debt restructuring, Domestic debt, Domestic Debt Restructuring, Financial sector stability, Government securities, Government Securities Markets, Sovereign Debt, Sovereign debt restructuring, Treasury bills and bonds

Publication Details

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