Sovereign Debt Restructuring in Emerging Markets

Recent sovereign debt restructurings in Zambia, Sri Lanka, and Ghana have highlighted the inadequacy of existing frameworks for addressing debt distress in emerging markets. The Common Framework, designed to coordinate creditor responses, has delivered mixed results at best.

Our analysis examines the key lessons from these restructurings: the critical role of bilateral negotiations, the evolving position of Chinese lenders, and the impact on future market access for restructured sovereigns. We also assess the emerging tools—such as climate-linked debt instruments and GDP-linked bonds—that could reshape how sovereign debt is structured for climate-vulnerable economies.