Global sovereign debt roundtable to meet on local debt restructuring -sources

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By Jorgelina do Rosario

LONDON (Reuters) -Global creditors will discuss the inclusion of domestic debt in restructuring plans for countries in default next week, two sources with direct knowledge of the matter told Reuters, a sign of progress after months of delays.

The Sept. 15 technical meeting of the Global Sovereign Debt Roundtable will include representatives, likely at deputy level, of the International Monetary Fund (IMF), the World Bank and Group of 20 (G20) major economies.

The talks will also cover the risks of local debt restructuring, such as second-round effects, said one of the two sources, who spoke on condition of anonymity.

They are expected to prepare the ground for a more high level reunion during the October IMF-World Bank meetings in Morocco on Oct. 9-15.

Countries such as Sri Lanka and Ghana recently included part or all of its domestic sovereign debt in ongoing debt restructurings after falling in default, though Zambia did not.

There is no common restructuring template for countries in default, with governments often deciding on how to treat local debt in the wake of an IMF debt sustainability analysis.

Overseas private creditors often push for burden sharing with domestic creditors during such debt restructurings. Governments tend to be reluctant over concerns that such a move could lead to instability in their financial sector, as domestic banks and pension funds are usually the biggest holders of these bonds.

An IMF spokesperson confirmed the meeting and said that a domestic debt rework “is among the several issues identified as challenges to debt restructuring.”

The meeting will also be attended by representatives of official and private creditors, borrowing countries, debt experts as well as financial and legal advisers.

A previous June technical meeting focused on cut-off dates, as consensus is needed on the starting date from which new loans are excluded from a restructuring.

The roundtable was launched late last year and held meetings in February and April amid rising concerns over continued delays in securing debt treatment for countries in default that are in talks with a wide variety of stakeholders like the Paris Club, India and China – the world’s largest bilateral creditor.

(Reporting by Jorgelina do Rosario, editing by Karin Strohecker and Philippa Fletcher)