Trésor-Info - Publications de la direction générale du Trésor - IMF

Coordinating Fragmented Creditors to Restructure Sovereign Debt: the Case of Sri Lanka

2025-06-26T00:00:00+02:00

On 12 April 2022, with an already precarious debt situation exacerbated by the COVID-19 pandemic, Sri Lanka announced that it was defaulting on its external debt. The deterioration in the country’s economic situation led Sri Lanka to negotiate an agreement with the IMF for a $2.9-billion Extended Fund Facility for the 2023-2027 period to support a reform programme.

In the wake of the COVID-19 pandemic, the G20 and the Paris Club adopted a Common Framework to coordinate debt restructuring for low-income countries, but Sri Lanka – a middle-income country when it defaulted – did not qualify. Nevertheless, the Common Framework’s coordination channels served to set up an ad-hoc Official Creditor Committee (OCC) co-chaired by France, India and Japan and including Paris Club creditors, India and Hungary, which accounted for 16% of the external debt stock. At the same time, a “flexible” coordination arrangement was put in place with China, which held 11% of Sri Lanka’s external debt stock.

The bondholders, accounting for 32% of the foreign creditors, restructured their securities by introducing an innovative financial instrument indexed to Sri Lanka’s GDP growth called macro-linked bonds. This contingent debt treatment complicated the official creditors’ assessment of effective terms of treatment from the private creditors at least equal to those of the official creditors (“comparability of treatment”).

Sri Lanka’s experience demonstrates the possibility of coordination with China outside of the Common Framework in order to proceed in parallel with debt treatment and prevent delays with the IMF-supported programme. Timely and regular discussions with bondholders also served to rapidly reach an agreement on debt treatments compliant with both IMF programme targets and the principle of comparability of treatment.

IMF Governance and the 16th General Review of Quotas

2025-05-22T00:00:00+02:00

The role of the International Monetary Fund (IMF), which was originally established in 1944 to stabilise currency exchange rates and organise international monetary and financial cooperation, has gradually been expanded. It currently plays an essential role in the international financial system.

The IMF’s governance is based on a system of quotas, which are allocated to each member country. Each country’s quota determines the financial contribution it is required to make to the IMF, its voting rights, and the number of special drawing rights it receives in general allocations. Although most decisions are made by consensus, this governance structure is similar to that of a company limited by shares, with quotas representing both each country’s contribution to the IMF’s permanent resources and its relative voting rights.

Each country’s quota is based on economic variables. The most recent change to the distribution of quotas between countries was made in 2010. Despite developments in the global economy and a number of quota reviews, the IMF’s ownership structure has remained unchanged since then. The 16th review, concluded in December 2023, provides for a uniform 50% increase in each country’s quota, without changing the distribution between countries.

Against this backdrop, questions surrounding a potential reform of the Fund’s governance continue to be relevant. These questions focus on how to realign the level and distribution of quotas with the size of the global economy and the relative weight of member countries. Following the commitment made by its members in October 2023, the IMF’s Executive Board is due to put forward its proposals by June 2025, as part of the 17th General Review of Quotas, including by considering how the theoretical quota formula could be changed.