Academic support for IMF’s proposal is limited, and a diverse group of critics supports alternative, market‐based solutions. One such solution includes the use of majority‐action clauses in bank and bond debt instruments that would bind all creditors to a debt renegotiation agreement between the country and creditor representatives, thus eliminating the need for unanimity among creditors. Another proposal explains how capital market tools already exist and how they have been used to renegotiate outstanding debt in a short period of time. The crisis in Argentina shows that a centralized bureaucratic management of debt problems was not needed to initiate reduction of outstanding debt or organize the country’s creditors.
Any of the proposals for dealing with sovereign debt problems may lead to reduced lending to emerging market economies. That may be a welcome change from the current culture of debt‐based development and overborrowing, which the IMF has helped to encourage. A greater reliance on equity investment may help set countries on a more sustainable growth path.
