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Legal Issues in Sovereign Debt

The challenge of managing sovereign debt comes with a lot of complex and real strategic approaches to retain the interest of lenders while the borrower nation is helped to retain the capacity to avoid defaults. The issues at play during negotiations and documentations critical of which are the terms upon which the loan is granted. The clarity as to the implication of each provision which may prove to be of an adverse interest to the borrower must be well understood. It is known that bilateral loans and those from Paris Club as distinct from the commercial loans of the London private lenders come with different dynamics. Events of default and compulsion to reschedule create difficulties as expectations of repayment fails. Sovereign borrowers are usually better tolerated despite the stress on the financial market portfolio such huge debts causes this is because of the social and developmental obligations of government. The growing trend of debt transfer, swap and securitisation has helped in converting debt to some kind of tradable product or 'asset' as it were. The knowledge and science of sovereign debt management remains a continuously evolving interconnection of policy, economics, politics and law.