State Contingent Debt Instruments (SCDIs) | 28 Oct 2024

Source: TH

The Global Sovereign Debt Roundtable (GSDR), which addresses challenges in debt restructuring processes, is set to discuss State Contingent Debt Instruments (SCDIs).

SCDIs:
- It helps speed up debt restructuring by offering bonds with payouts contingent on countries meeting specific economic or fiscal targets.
  - E.g., GDP-linked bonds issued by Ukraine that are tied to economic growth.
- They do not have a fixed interest rate.
  - Payout structure varies depending on economic growth, natural resource revenue, or tax receipts.
- SCDIs act as “deal accelerators,” especially in cases where there are fundamental disagreements about a country's economic outlook.
GSDR:
- GSDR, which is co-chaired by the IMF, World Bank, and the G20 Presidency (currently Brazil), started functioning in 2023.
- It comprises official bilateral creditors (both traditional creditors members of the Paris Club and new creditors), private creditors and borrowing countries.
  - The Paris Club (1956) is an informal group of creditor countries that work together to support nations facing financial difficulties, chiefly those struggling to pay off debts.