The COVID-19 pandemic is triggering sovereign debt distress across the globe. Public debt was already elevated in many countries before the crisis hit, and the pandemic has created a surge of debt with no precedent, even during wars. How governments learn to live with such debt levels or find orderly — or less orderly — ways to reduce them will have a critical impact on people’s lives across the world.
In this report, Lazard’s Sovereign Advisory Group examines ways to improve outcomes for governments facing a debt reckoning. The report explores key characteristics of today’s sovereign debt landscape:
- The wide variation in public debt levels across countries and the fact that each country’s capacity for debt is highly idiosyncratic
- The complex policy trade-offs faced by governments at risk of financial distress
- How a significant evolution in the creditor base is changing the dynamics of debt restructuring
- How the process of debt restructuring could be made smoother