Question to the HM Treasury:

To ask the Chancellor of the Exchequer, what steps his Department is taking to help ensure that buyers of distressed government debt from emerging markets enable the restructuring of that debt when emergent countries national circumstances change for the worse.

The UK government is committed to ensuring that private sector creditors participate in debt restructurings. When undertaking a debt restructuring, a key principle for the UK and other Paris Club members is ‘Comparability of Treatment’. This requires all bilateral and commercial creditors to participate in a debt reorganisation arrangement on terms comparable to those of the Paris Club.

The majority of sovereign bond contracts contain collective action clauses (CACs). These facilitate more orderly sovereign debt restructurings by reducing the possibility for one or a small number of holdout or non-responsive lenders to block a decision taken by the qualified majority of lenders. The UK is working closely with international partners and a range of private sector stakeholders to explore the introduction of similar clauses into private syndicated lending.