1 00:00:11,119 --> 00:00:14,480 Speaker 1: Hello, and welcome to another episode of the Odd Thoughts podcast. 2 00:00:14,600 --> 00:00:18,960 Speaker 1: I'm Tracy Allaway and I'm Joe wisnal So Joe, Uh, 3 00:00:19,000 --> 00:00:21,279 Speaker 1: I think it's fair to say that the world is 4 00:00:21,320 --> 00:00:29,160 Speaker 1: in a pretty bad place right now. I would not disagree. Um, 5 00:00:29,200 --> 00:00:33,720 Speaker 1: we just had jobless claims. Those are still pretty bad. Obviously, 6 00:00:33,840 --> 00:00:36,600 Speaker 1: we have a huge question mark over the U S economy. 7 00:00:36,840 --> 00:00:41,239 Speaker 1: Europe has been doing very poorly as well. But I 8 00:00:41,280 --> 00:00:43,120 Speaker 1: think it's also fair to say that some parts of 9 00:00:43,120 --> 00:00:48,040 Speaker 1: the world are doing worse than others. Yeah, it's really 10 00:00:48,120 --> 00:00:51,320 Speaker 1: interesting because, of course you have to disentangle the sort 11 00:00:51,320 --> 00:00:57,160 Speaker 1: of health crisis specifically from the economic crisis. There are 12 00:00:57,240 --> 00:01:01,120 Speaker 1: parts of the world that may actually be doing better, uh, 13 00:01:01,280 --> 00:01:04,360 Speaker 1: in a surprising sense in terms of the outbreak of 14 00:01:04,400 --> 00:01:08,959 Speaker 1: the public health crisis the virus, but obviously not getting 15 00:01:09,040 --> 00:01:11,840 Speaker 1: spared at all from the fact that so much commerce 16 00:01:12,080 --> 00:01:17,800 Speaker 1: is that a virtual, virtual standstill. So even even places 17 00:01:17,880 --> 00:01:19,960 Speaker 1: that yeah, well the numbers don't seem as bad as 18 00:01:20,000 --> 00:01:22,920 Speaker 1: the UK or the U S from an economic situation, 19 00:01:23,000 --> 00:01:26,679 Speaker 1: they may be even worth potentially. Yeah, but you also 20 00:01:26,760 --> 00:01:29,440 Speaker 1: have some parts of the world where both the health 21 00:01:29,480 --> 00:01:33,039 Speaker 1: crisis and the financial crisis is pretty bad. And I'm 22 00:01:33,040 --> 00:01:36,760 Speaker 1: thinking specifically of emerging markets. So these are countries that 23 00:01:36,840 --> 00:01:40,040 Speaker 1: don't necessarily have a really developed health system, and they 24 00:01:40,080 --> 00:01:43,600 Speaker 1: certainly don't have a lot of money necessarily to suddenly 25 00:01:43,680 --> 00:01:48,160 Speaker 1: direct to containing a pandemic. And now, of course they're 26 00:01:48,200 --> 00:01:52,160 Speaker 1: dealing with an economic crisis that is making the money 27 00:01:52,200 --> 00:01:55,720 Speaker 1: that they have even well reducing the amount of money 28 00:01:55,760 --> 00:01:58,360 Speaker 1: available to them to fight the crisis. So it's really 29 00:01:58,440 --> 00:02:02,840 Speaker 1: like a double whammy at this point. Right, that's exactly right. 30 00:02:03,200 --> 00:02:06,880 Speaker 1: Relatively rich countries or rich countries like the US, for 31 00:02:07,160 --> 00:02:10,200 Speaker 1: as bad as we may be doing on the public 32 00:02:10,360 --> 00:02:15,440 Speaker 1: health side, there's no real financial constraint to spending a 33 00:02:15,480 --> 00:02:17,760 Speaker 1: lot of money, both in terms of helping people pay 34 00:02:17,800 --> 00:02:20,840 Speaker 1: their bills and also building out a public health system. 35 00:02:20,880 --> 00:02:24,400 Speaker 1: It's more of a political capacity constraint. But some countries, 36 00:02:24,440 --> 00:02:28,480 Speaker 1: obviously they simply don't have the fiscal capacity to do 37 00:02:28,560 --> 00:02:32,240 Speaker 1: what's necessary to really fight the health front, even if 38 00:02:32,240 --> 00:02:37,480 Speaker 1: there worthy desire or the political capacity to do so. Right, So, 39 00:02:37,560 --> 00:02:39,280 Speaker 1: as bad as it gets in the U S, don't 40 00:02:39,280 --> 00:02:42,120 Speaker 1: forget that the US government can always issue treasuries. And 41 00:02:42,560 --> 00:02:46,640 Speaker 1: why didn't its deficit for extra fiscal spending, um Sorry 42 00:02:46,680 --> 00:02:48,680 Speaker 1: that sounded flippant, but I don't intend it to be. 43 00:02:48,760 --> 00:02:52,320 Speaker 1: That actually is UH an advantage. Okay, well, so today 44 00:02:52,440 --> 00:02:55,320 Speaker 1: we're gonna be digging into emerging markets. We're going to 45 00:02:55,400 --> 00:02:58,360 Speaker 1: talk about some of those fiscal dynamics, but we're especially 46 00:02:58,400 --> 00:03:02,320 Speaker 1: going to zoom in on this debt question and how 47 00:03:02,360 --> 00:03:06,359 Speaker 1: emerging markets can actually handle the spending that they need 48 00:03:06,480 --> 00:03:09,600 Speaker 1: or raise the money that they need in order to 49 00:03:09,639 --> 00:03:12,840 Speaker 1: fight the coronavirus. Exactly right. So, I mean we've talked 50 00:03:12,840 --> 00:03:16,160 Speaker 1: about this before, we had a discussion on it. We 51 00:03:16,240 --> 00:03:20,280 Speaker 1: talked to brand Setser several weeks ago. That was before 52 00:03:20,600 --> 00:03:23,359 Speaker 1: some of the I think I'm f meetings, but it's 53 00:03:23,400 --> 00:03:26,720 Speaker 1: still I think many people still sense that there is 54 00:03:26,919 --> 00:03:29,600 Speaker 1: much more that needs to be done. And again, because 55 00:03:29,639 --> 00:03:33,600 Speaker 1: of the nature viruses and also economic collapses, I think 56 00:03:33,639 --> 00:03:37,400 Speaker 1: time really is of the essence to move before extreme 57 00:03:37,520 --> 00:03:42,840 Speaker 1: lasting damage takes place. Okay, Well, on that note, let's 58 00:03:42,880 --> 00:03:45,240 Speaker 1: get straight to it. Then. I'm really happy to say 59 00:03:45,280 --> 00:03:48,680 Speaker 1: that we have not one, not two, but three guests 60 00:03:49,160 --> 00:03:52,440 Speaker 1: on today's episode. Two of them have been with odd 61 00:03:52,480 --> 00:03:55,800 Speaker 1: thoughts before one is brand new. I'm going to introduce 62 00:03:55,840 --> 00:03:59,080 Speaker 1: them all. Uh Midto Glate is a professor of law 63 00:03:59,120 --> 00:04:01,520 Speaker 1: at Duke Universe City and of course one of the 64 00:04:01,560 --> 00:04:06,160 Speaker 1: world's foremost experts on sovereign debt restructurings. Lee book High 65 00:04:06,400 --> 00:04:10,160 Speaker 1: is the legendary sovereign debt lawyer, now retired from Cleary 66 00:04:10,200 --> 00:04:15,080 Speaker 1: Gottlie but an honorary professor at the University of Edinburgh, 67 00:04:15,440 --> 00:04:19,880 Speaker 1: and Ugo Panizza is Professor of International Economics at the 68 00:04:19,920 --> 00:04:24,160 Speaker 1: Graduate Institute in Geneva. All three of them and X 69 00:04:24,360 --> 00:04:27,440 Speaker 1: are experts in their fields and they've come up with 70 00:04:27,480 --> 00:04:30,480 Speaker 1: a proposal for how emerging markets might be able to 71 00:04:30,720 --> 00:04:33,840 Speaker 1: weather this crisis. So thank you all for coming on. 72 00:04:34,080 --> 00:04:37,920 Speaker 1: Thank you, thank you, thank you. Why don't we uh 73 00:04:38,279 --> 00:04:41,760 Speaker 1: set out the scene. I guess how much trouble are 74 00:04:41,880 --> 00:04:47,800 Speaker 1: emerging markets actually in at the moment? Very big trouble, 75 00:04:49,520 --> 00:04:52,560 Speaker 1: if that's the question. If you one, they can give 76 00:04:52,600 --> 00:04:56,280 Speaker 1: you a couple of numbers. So we run some estimates 77 00:04:56,440 --> 00:05:00,200 Speaker 1: and according to our estimates, emerging markets need to um 78 00:05:00,720 --> 00:05:05,600 Speaker 1: service that in the next twelve months for nearly nine 79 00:05:06,160 --> 00:05:10,920 Speaker 1: million dollars. We so this is the public sector and 80 00:05:10,960 --> 00:05:13,760 Speaker 1: this is the external that of the public sector of 81 00:05:13,760 --> 00:05:16,640 Speaker 1: this emerging market country. So this is UH, this is 82 00:05:16,680 --> 00:05:20,280 Speaker 1: a large amount of money, and there was a not 83 00:05:20,440 --> 00:05:24,400 Speaker 1: paid by the Prime Minister of Ethiopia in the in 84 00:05:24,440 --> 00:05:28,320 Speaker 1: the New York Times last week, we basically said that 85 00:05:28,480 --> 00:05:31,720 Speaker 1: some in Ethiopia and some other discontents, they need to 86 00:05:31,720 --> 00:05:35,720 Speaker 1: face the choice whether to services that or you know, 87 00:05:35,920 --> 00:05:39,480 Speaker 1: spent for health care of the their own citizens. So 88 00:05:39,520 --> 00:05:45,240 Speaker 1: that's a difficult choice mhm. So already there are countries 89 00:05:46,200 --> 00:05:49,400 Speaker 1: that have been forced just in these in the short 90 00:05:49,720 --> 00:05:51,360 Speaker 1: you know, it's really just been a couple of months. 91 00:05:51,680 --> 00:05:55,599 Speaker 1: Already we're seeing companies forced or started, countries forced to 92 00:05:56,279 --> 00:05:59,520 Speaker 1: make one priority over the other, either stay good on 93 00:05:59,680 --> 00:06:04,680 Speaker 1: their external public debt or do the necessary spending to 94 00:06:04,880 --> 00:06:07,680 Speaker 1: keep the virus in check. Yes, there there have been 95 00:06:08,520 --> 00:06:13,760 Speaker 1: a hundred countries that have asked the IMF for emergency 96 00:06:13,839 --> 00:06:17,640 Speaker 1: financial assistance. That's more than half the membership of the IMF. 97 00:06:18,600 --> 00:06:23,520 Speaker 1: But that money will not be enough and in for 98 00:06:23,680 --> 00:06:28,200 Speaker 1: some countries not nearly enough to defray the extra expenses 99 00:06:28,279 --> 00:06:31,560 Speaker 1: that are coming with this health crisis. Therefore, they're faced 100 00:06:31,600 --> 00:06:35,360 Speaker 1: with its choice of having to divert funds that had 101 00:06:35,400 --> 00:06:40,120 Speaker 1: been earmarked for other governmental purposes, including debt service, to 102 00:06:40,400 --> 00:06:47,839 Speaker 1: divert those funds towards the expenses of dealing with this pandemic. 103 00:06:48,640 --> 00:06:51,039 Speaker 1: If I can just add one number. So the the 104 00:06:51,120 --> 00:06:54,440 Speaker 1: I m F forecast growth for all of one ninety 105 00:06:54,480 --> 00:06:58,560 Speaker 1: member countries, and at the peak of the global financial crisis, 106 00:06:58,640 --> 00:07:03,359 Speaker 1: it forecasted growth positive growth for seventy seven countries. This 107 00:07:03,520 --> 00:07:07,240 Speaker 1: year is forecasting positive growth for nine countries. This is 108 00:07:07,279 --> 00:07:11,000 Speaker 1: really and even for these nine plants, they are forecasting 109 00:07:11,560 --> 00:07:17,320 Speaker 1: very low positive growth, which nobody about supercent I'm actually 110 00:07:17,360 --> 00:07:22,640 Speaker 1: surprised at nine countries forecast for positive growth. Okay, Lee, 111 00:07:22,840 --> 00:07:25,520 Speaker 1: you mentioned the number of countries that have approached the 112 00:07:25,520 --> 00:07:29,360 Speaker 1: I m F for help. We've also had an agreement 113 00:07:30,360 --> 00:07:33,800 Speaker 1: from the G twenty for a temporary debt stand still 114 00:07:34,040 --> 00:07:36,040 Speaker 1: I want to bring in mid to maybe you could 115 00:07:36,040 --> 00:07:39,600 Speaker 1: talk about that and what's involved in that stand still. 116 00:07:40,400 --> 00:07:44,640 Speaker 1: You know, there have been some efforts to think about 117 00:07:44,760 --> 00:07:50,320 Speaker 1: the global implications of the current crisis, and one of 118 00:07:50,360 --> 00:07:56,840 Speaker 1: the efforts that seemed very positive started with and I 119 00:07:57,040 --> 00:08:02,440 Speaker 1: MF World Bank Call for Action and was then followed 120 00:08:02,440 --> 00:08:06,960 Speaker 1: by the G twenty, you know, announcing that there would 121 00:08:07,000 --> 00:08:10,960 Speaker 1: be a debt moratorium for the rest of the year 122 00:08:13,360 --> 00:08:17,480 Speaker 1: on debts on payments that are owed to the bilaterals, 123 00:08:18,400 --> 00:08:23,080 Speaker 1: and importantly in that there was a request that the 124 00:08:23,200 --> 00:08:29,040 Speaker 1: private creditor sector also provide similar relief, and there had 125 00:08:29,080 --> 00:08:33,439 Speaker 1: been indications that they were willing. The Institute of International 126 00:08:33,480 --> 00:08:36,680 Speaker 1: Finance sort of a lobbying group for the private creditors, 127 00:08:37,160 --> 00:08:40,800 Speaker 1: had agreed that yes, we should provide relief to the 128 00:08:40,880 --> 00:08:45,600 Speaker 1: poorest countries in the world altogether, all on comparable terms, 129 00:08:46,520 --> 00:08:51,719 Speaker 1: and this seemed like a very positive sign that at 130 00:08:51,800 --> 00:08:56,280 Speaker 1: least we were beginning to think about this providing relief 131 00:08:56,600 --> 00:09:03,640 Speaker 1: very quickly. Unfortunately, as of today, this seems like it is, 132 00:09:04,600 --> 00:09:09,760 Speaker 1: in my skeptical viewpoint, all completely falling apart. All of 133 00:09:09,840 --> 00:09:14,520 Speaker 1: those enthusiastic statements about providing relief for the rest of 134 00:09:14,559 --> 00:09:18,600 Speaker 1: the year UH seem to be going nowhere. I think 135 00:09:18,600 --> 00:09:21,440 Speaker 1: the official sector will provide the relief. I think the 136 00:09:21,480 --> 00:09:25,800 Speaker 1: private sector is basically trying to delay and not provide 137 00:09:25,960 --> 00:09:29,840 Speaker 1: any relief whatsoever. I'm sure I hope that they call 138 00:09:29,920 --> 00:09:32,480 Speaker 1: in and yell at us and say that no, they 139 00:09:32,520 --> 00:09:35,360 Speaker 1: actually want to provide relief, but I don't see it 140 00:09:35,440 --> 00:09:39,559 Speaker 1: going anywhere. Well, Lee, I'm thinking about you know, Tracy, 141 00:09:39,640 --> 00:09:42,960 Speaker 1: and I talked with you um several months ago at 142 00:09:42,960 --> 00:09:47,040 Speaker 1: one of our live events and these sort of these 143 00:09:47,240 --> 00:09:51,840 Speaker 1: debt renegotiations. Even in the simplest terms, if it's just 144 00:09:51,960 --> 00:09:56,120 Speaker 1: one country trying to renegotiate some of its debt, they 145 00:09:56,160 --> 00:10:00,319 Speaker 1: seem to you know, these renegotiations can go on for years, 146 00:10:00,320 --> 00:10:03,320 Speaker 1: with different classes of creditors who own different types of 147 00:10:03,360 --> 00:10:07,640 Speaker 1: bonds um all trying to get their share. I can 148 00:10:07,679 --> 00:10:12,360 Speaker 1: only imagine that it's orders of magnitude more complex when 149 00:10:12,360 --> 00:10:16,880 Speaker 1: it trying to basically do a solution for every country 150 00:10:16,880 --> 00:10:19,800 Speaker 1: in the world at the same time. Well, the way 151 00:10:19,840 --> 00:10:22,960 Speaker 1: we've been thinking about it is that we have an 152 00:10:22,960 --> 00:10:27,120 Speaker 1: immediate emergency, and that is the need to get funding 153 00:10:27,120 --> 00:10:29,360 Speaker 1: into the hands of these countries to deal with the 154 00:10:29,400 --> 00:10:34,840 Speaker 1: pandemic entering. They were a handful of countries who had 155 00:10:34,880 --> 00:10:43,559 Speaker 1: already acknowledged that they needed a full scale debt restructuring Argentina, Lebanon, Ecuador, Venezuela. Obviously, 156 00:10:44,800 --> 00:10:49,120 Speaker 1: we will leave with a much longer list of countries 157 00:10:49,160 --> 00:10:52,199 Speaker 1: that need a full scale debt restructuring, but that's not 158 00:10:52,280 --> 00:10:56,720 Speaker 1: the focus right now. The immediate focus in the and 159 00:10:56,720 --> 00:11:00,280 Speaker 1: and the paper that my colleagues and I produced was 160 00:11:00,679 --> 00:11:10,200 Speaker 1: intended to find a way quickly and uniformly two free 161 00:11:10,280 --> 00:11:15,680 Speaker 1: up liberate cash that these countries could use for COVID 162 00:11:15,800 --> 00:11:22,520 Speaker 1: nineteen amelioration. This program that me too has described involving 163 00:11:22,559 --> 00:11:26,480 Speaker 1: the official sector and we hoped the private sector, was 164 00:11:26,559 --> 00:11:32,520 Speaker 1: all intended to focus on that. Everyone knows that within 165 00:11:32,600 --> 00:11:36,160 Speaker 1: a relatively short space of time we will have to 166 00:11:36,200 --> 00:11:39,880 Speaker 1: confront the broader issue that you've just mentioned. How does 167 00:11:39,960 --> 00:11:45,240 Speaker 1: one deal with full scale debt restructurings, because many countries 168 00:11:45,559 --> 00:11:51,680 Speaker 1: will exit the COVID period with unsustainable debt stocks. That 169 00:11:51,760 --> 00:11:55,079 Speaker 1: will be a challenge, frankly, that we have not faced 170 00:11:55,280 --> 00:11:59,600 Speaker 1: since the and the Latin American debt crisis and the 171 00:11:59,640 --> 00:12:03,640 Speaker 1: world it was very different back then. Mh. I want 172 00:12:03,679 --> 00:12:06,079 Speaker 1: to get to that point, but before we do, perhaps 173 00:12:06,080 --> 00:12:08,520 Speaker 1: one of you could just walk us through what your 174 00:12:08,559 --> 00:12:12,440 Speaker 1: proposal actually entails. As you mentioned, you know, maybe it's 175 00:12:12,440 --> 00:12:15,440 Speaker 1: not that difficult to have a debt stand still for 176 00:12:16,000 --> 00:12:20,920 Speaker 1: bilateral sovereign creditors. Not that difficult. Maybe maybe that's sort 177 00:12:20,960 --> 00:12:23,720 Speaker 1: of overegging it. But there is a sticking point in 178 00:12:23,760 --> 00:12:27,200 Speaker 1: the form of the private creditors. So what's your solution here? 179 00:12:28,080 --> 00:12:30,680 Speaker 1: Why don't why don't I walk you through it? It's 180 00:12:30,720 --> 00:12:35,520 Speaker 1: it's really quite straightforward. We propose that the dead are 181 00:12:35,640 --> 00:12:39,160 Speaker 1: countries that need this relief, and not all of them will. 182 00:12:40,000 --> 00:12:43,640 Speaker 1: Some of them will not be afflicted by the epidemic 183 00:12:43,679 --> 00:12:48,200 Speaker 1: as badly as others, and some may continue to have 184 00:12:48,480 --> 00:12:53,480 Speaker 1: or at least have hopes of having market access. But 185 00:12:53,760 --> 00:12:57,320 Speaker 1: for the rest, we propose that they open what we 186 00:12:57,440 --> 00:13:03,040 Speaker 1: call a central credit Facility CCF with a multilateral development 187 00:13:03,040 --> 00:13:05,520 Speaker 1: bank that could be the World Bank, but it could 188 00:13:05,520 --> 00:13:08,760 Speaker 1: be one of the regional development banks African Development Bank, 189 00:13:08,880 --> 00:13:13,000 Speaker 1: Asian Development Back, and so forth. The country would then 190 00:13:13,360 --> 00:13:20,040 Speaker 1: divert the payments that would normally have gone towards interest 191 00:13:20,040 --> 00:13:23,760 Speaker 1: payments on external debt. It would divert those payments into 192 00:13:24,160 --> 00:13:30,800 Speaker 1: the central credit facility. As the amounts arrive at the CCF, 193 00:13:31,480 --> 00:13:36,240 Speaker 1: the administrator the multilateral Development bank would credit the relevant 194 00:13:36,480 --> 00:13:41,640 Speaker 1: creditor with a participation interest in the CCF, just like 195 00:13:41,800 --> 00:13:47,080 Speaker 1: a syndicated loan. The country could then borrow from the 196 00:13:47,160 --> 00:13:53,760 Speaker 1: CCF to deal with COVID nineteen related expenses. This is 197 00:13:53,800 --> 00:13:59,360 Speaker 1: a critical feature because the multilateral Development Bank would be 198 00:13:59,400 --> 00:14:04,240 Speaker 1: responsible for monitoring the use of that money. No individual 199 00:14:04,400 --> 00:14:08,000 Speaker 1: commercial creditor or even group of commercial creditors is going 200 00:14:08,040 --> 00:14:11,000 Speaker 1: to be in a position to undertake that monitoring task. 201 00:14:11,440 --> 00:14:16,040 Speaker 1: And the last thing anyone wants is money that has 202 00:14:16,200 --> 00:14:21,520 Speaker 1: been effectively contributed by creditors to deal with this pandemic 203 00:14:22,280 --> 00:14:26,280 Speaker 1: being siphoned away for other purposes. Put it that way, 204 00:14:26,320 --> 00:14:29,840 Speaker 1: so the multi ladder of Development Bank would be responsible 205 00:14:29,920 --> 00:14:34,160 Speaker 1: for that. The We don't specify what the financial terms 206 00:14:34,680 --> 00:14:38,840 Speaker 1: of the CCF should be, but common sense is that 207 00:14:38,920 --> 00:14:43,479 Speaker 1: they should be. That the repayment terms for the CCFP 208 00:14:43,600 --> 00:14:48,240 Speaker 1: should not put further burden on the post COVID financial 209 00:14:48,280 --> 00:14:52,880 Speaker 1: position of these countries. In a nutshell, that's the nut 210 00:14:54,120 --> 00:14:56,240 Speaker 1: Do any of you have an estimate for how much 211 00:14:56,280 --> 00:15:00,320 Speaker 1: money that could actually free up? Its kind of ends 212 00:15:00,440 --> 00:15:06,280 Speaker 1: on whether the bilateral creditors are also going to participate 213 00:15:06,480 --> 00:15:09,000 Speaker 1: in this bugle would have a better idea. I think 214 00:15:09,000 --> 00:15:14,680 Speaker 1: of the numbers, the number is the maximum number. It's 215 00:15:14,760 --> 00:15:18,440 Speaker 1: what I gave you before. If you only focus on payment, 216 00:15:18,520 --> 00:15:21,160 Speaker 1: you on long term death. The maximum number is what 217 00:15:21,200 --> 00:15:22,840 Speaker 1: I gave you before. That of course I gave it 218 00:15:22,880 --> 00:15:25,520 Speaker 1: to you wrong, because I always get confused between millions 219 00:15:25,560 --> 00:15:31,840 Speaker 1: and billions. I gave you a number of about nine millions, 220 00:15:32,040 --> 00:15:37,320 Speaker 1: actually nine hundred billions. That's well that's the maximum amount 221 00:15:37,480 --> 00:15:41,480 Speaker 1: which is owed by all emerging and developing countries. Clearly, 222 00:15:41,560 --> 00:15:45,600 Speaker 1: as Lee said, not all countries would need this type 223 00:15:45,600 --> 00:15:47,800 Speaker 1: of help, So is this sort of an upper bound 224 00:15:48,600 --> 00:15:52,520 Speaker 1: UH and and the amount varies from from the country 225 00:15:52,560 --> 00:15:56,120 Speaker 1: to country. But that's sort of let's say, the the 226 00:15:56,200 --> 00:16:11,920 Speaker 1: end alope, the maximum memberlope. So we haven't, as Lead 227 00:16:11,960 --> 00:16:15,480 Speaker 1: pointed out, where just this first stage which we need 228 00:16:15,640 --> 00:16:21,640 Speaker 1: immediate cash for these countries to fight the health crisis. Obviously, 229 00:16:22,480 --> 00:16:24,680 Speaker 1: the question of where they will be in terms of 230 00:16:24,720 --> 00:16:28,440 Speaker 1: dead stock sustainability, that's probably a question for next year, 231 00:16:28,440 --> 00:16:31,440 Speaker 1: and that's gonna be infinitely more complex. But in terms 232 00:16:31,480 --> 00:16:35,680 Speaker 1: of implementing the plan put forth by the three of 233 00:16:35,760 --> 00:16:38,840 Speaker 1: you to free up this cash through UH sort of 234 00:16:38,880 --> 00:16:43,440 Speaker 1: international development a bank or multiple banks, who are the 235 00:16:43,480 --> 00:16:47,360 Speaker 1: actors that need to make this happen, just to coordinate 236 00:16:47,480 --> 00:16:50,160 Speaker 1: this first step and why is it proving to be 237 00:16:50,520 --> 00:16:55,680 Speaker 1: so challenging to coordinate them? Initially it seemed like everybody 238 00:16:55,800 --> 00:17:01,240 Speaker 1: was going to cooperate, the key actors in coordinate such 239 00:17:01,280 --> 00:17:05,400 Speaker 1: an effort because we do not have anything like an 240 00:17:05,400 --> 00:17:10,439 Speaker 1: international sovereign bankruptcy scheme. UH. This all has to be 241 00:17:10,520 --> 00:17:16,320 Speaker 1: done in a cooperative fashion. And as the historical matter, 242 00:17:16,800 --> 00:17:20,879 Speaker 1: the key actors have always been the I m F 243 00:17:21,440 --> 00:17:25,199 Speaker 1: and the multilaterals. Here, the I m F and the 244 00:17:25,200 --> 00:17:30,440 Speaker 1: World Bank, through their leadership, took early action. I think 245 00:17:30,480 --> 00:17:34,560 Speaker 1: marchy was when they put out their call to action 246 00:17:35,119 --> 00:17:40,440 Speaker 1: and the private creditor group initially seemed to support this, 247 00:17:42,320 --> 00:17:46,200 Speaker 1: which then resulted in the G twenty taking concrete actions. 248 00:17:46,200 --> 00:17:51,000 Speaker 1: So end of March early April, it looked like we 249 00:17:51,000 --> 00:17:53,560 Speaker 1: were going to be able to provide on a global 250 00:17:53,640 --> 00:18:00,639 Speaker 1: scale relief to basically half the world for the rest 251 00:18:00,640 --> 00:18:06,199 Speaker 1: of massive relief as Google put the numbers in, and 252 00:18:06,359 --> 00:18:12,879 Speaker 1: then as the question of implementation, so our team was thinking, 253 00:18:13,200 --> 00:18:16,240 Speaker 1: you know, everybody's cooperating, this is just a matter of 254 00:18:16,320 --> 00:18:21,120 Speaker 1: figuring out how do we enable the cooperation. And as 255 00:18:21,200 --> 00:18:24,600 Speaker 1: we were working on the enabling the co operation, the 256 00:18:24,800 --> 00:18:30,879 Speaker 1: willingness to cooperate gradually diminished. Now there are many motivations 257 00:18:30,920 --> 00:18:33,800 Speaker 1: one can ascribe to this, or maybe this is just 258 00:18:33,880 --> 00:18:37,720 Speaker 1: the natural process, but uh, you know, as the G 259 00:18:37,880 --> 00:18:41,159 Speaker 1: twenty said we will provide official sector relief to the 260 00:18:41,200 --> 00:18:49,879 Speaker 1: poorest countries, then the free rider tendencies blossomed, and I 261 00:18:50,000 --> 00:18:54,479 Speaker 1: suspect that at least some in the private creditor world said, oh, well, 262 00:18:54,520 --> 00:18:58,560 Speaker 1: if the official sector will provide all this relief, maybe 263 00:18:58,560 --> 00:19:01,640 Speaker 1: we don't need to provide relief. Maybe we need to explain, 264 00:19:02,119 --> 00:19:04,080 Speaker 1: you know, we didn't really mean we were going to 265 00:19:04,200 --> 00:19:10,600 Speaker 1: provide relief. We want, you know, proper compensation. Oh. You know, 266 00:19:10,720 --> 00:19:14,560 Speaker 1: many of these countries actually can borrow it. Market rates 267 00:19:14,560 --> 00:19:17,320 Speaker 1: are about market rates, and maybe we should just let 268 00:19:17,359 --> 00:19:22,640 Speaker 1: them borrow. And maybe we have fiduciary obligations, even though 269 00:19:22,880 --> 00:19:25,240 Speaker 1: many of the people have spoken to don't even understand 270 00:19:25,240 --> 00:19:30,240 Speaker 1: what fiduciary obligations are. Uh. So it is looking like 271 00:19:31,160 --> 00:19:34,520 Speaker 1: the official sector will have to provide the temporary relief. 272 00:19:34,520 --> 00:19:39,040 Speaker 1: It won't be enough private Uh. Many countries who have 273 00:19:39,240 --> 00:19:43,160 Speaker 1: access will continue to borrow, even though I think they 274 00:19:43,200 --> 00:19:46,320 Speaker 1: should not borrow as this stage. If you read their 275 00:19:46,400 --> 00:19:50,840 Speaker 1: risk disclosures, you would think they should not borrow. And 276 00:19:50,880 --> 00:19:56,040 Speaker 1: then the debt restructuring when it comes, will come earlier 277 00:19:56,080 --> 00:20:00,920 Speaker 1: than it should and will be brutal. I do want 278 00:20:00,920 --> 00:20:03,200 Speaker 1: to talk about the issuance that we are seeing from 279 00:20:03,240 --> 00:20:07,800 Speaker 1: emerging markets, but before we do, I understand the free 280 00:20:07,920 --> 00:20:12,000 Speaker 1: rider point for private creditors, But do you think private 281 00:20:12,040 --> 00:20:16,240 Speaker 1: creditors might also be worried that by agreeing to agreeing 282 00:20:16,280 --> 00:20:20,320 Speaker 1: to the stand still, they're basically opening up a Pandora's 283 00:20:20,400 --> 00:20:24,359 Speaker 1: box of I don't want to say excuses, but extenuating 284 00:20:24,400 --> 00:20:28,760 Speaker 1: circumstances that countries could use to hit the pause button 285 00:20:28,840 --> 00:20:33,960 Speaker 1: on their payments going forward. Is that a concern? It 286 00:20:34,160 --> 00:20:39,359 Speaker 1: is possibly a concern, But I don't think anyone living 287 00:20:39,400 --> 00:20:43,119 Speaker 1: through the experience that we're all living through believes that 288 00:20:43,200 --> 00:20:48,680 Speaker 1: this is anything other than a truly exceptional worldwide phenomenon. 289 00:20:51,000 --> 00:20:55,200 Speaker 1: None of us, none of us alive today, have ever 290 00:20:55,240 --> 00:21:01,040 Speaker 1: seen anything like it. And so while there's always a 291 00:21:01,280 --> 00:21:06,760 Speaker 1: slippery slope concern in these things, I think the official 292 00:21:06,840 --> 00:21:11,600 Speaker 1: sector and the private sector could minimize that by ensuring 293 00:21:11,680 --> 00:21:16,000 Speaker 1: that every time they speak about the relief that they're 294 00:21:16,040 --> 00:21:20,240 Speaker 1: now providing, they do so in terms that confines it 295 00:21:21,359 --> 00:21:28,680 Speaker 1: two circumstances of this once in a century variety. I mean, 296 00:21:28,920 --> 00:21:32,359 Speaker 1: just to reinforce what at least said. You know, if 297 00:21:32,400 --> 00:21:36,360 Speaker 1: you post some some policy, you always use the slippery 298 00:21:36,400 --> 00:21:40,440 Speaker 1: slope argument, right from legalization of marijuana to whatever right 299 00:21:41,160 --> 00:21:44,600 Speaker 1: you legalize marijuana, and the day after everybody is shooting 300 00:21:44,760 --> 00:21:48,320 Speaker 1: roine or whatever. I mean, you know, the Bank of 301 00:21:48,400 --> 00:21:51,280 Speaker 1: England just announced that this this is the worth recession 302 00:21:51,320 --> 00:21:54,879 Speaker 1: in three hundred years. You know, they postponed the Olympic Games. 303 00:21:55,119 --> 00:21:58,879 Speaker 1: I mean, there have been we observe so many, so 304 00:21:58,960 --> 00:22:02,800 Speaker 1: many exceptions actions that the idea of saying, you know, 305 00:22:02,800 --> 00:22:05,680 Speaker 1: if you do something now, then you know next year 306 00:22:05,800 --> 00:22:08,800 Speaker 1: somebody is coming out with some excuse, or this happened, 307 00:22:09,200 --> 00:22:11,359 Speaker 1: you know in twenty twenty, we're going to do it again. 308 00:22:11,440 --> 00:22:13,959 Speaker 1: It seems a bit a sign if you don't want 309 00:22:14,000 --> 00:22:16,440 Speaker 1: to do something or coming up with some some excuse, 310 00:22:16,840 --> 00:22:19,119 Speaker 1: can I ask you a question? And it's kind of 311 00:22:19,400 --> 00:22:22,000 Speaker 1: falling on mid to his point, and it's a little 312 00:22:22,119 --> 00:22:25,480 Speaker 1: less academic or less theoretical. But for those who have 313 00:22:25,560 --> 00:22:28,240 Speaker 1: not of us, who have never been in these rooms 314 00:22:28,280 --> 00:22:32,720 Speaker 1: where the negotiations take place and these discussions about establishing 315 00:22:32,720 --> 00:22:36,800 Speaker 1: new facilities and debt pauses take place. You mentioned the 316 00:22:36,880 --> 00:22:40,640 Speaker 1: G twenty. But when you talk about the private sector, 317 00:22:41,040 --> 00:22:44,680 Speaker 1: the private owners of government debt, how do you mean 318 00:22:44,720 --> 00:22:46,680 Speaker 1: there's thousands that I don't know how many there are, 319 00:22:46,720 --> 00:22:50,600 Speaker 1: But how did they coordinate and who who talks for them? 320 00:22:50,640 --> 00:22:53,160 Speaker 1: And how do they have a voice in the first place? 321 00:22:53,160 --> 00:22:58,119 Speaker 1: What did those negotiations sound like well, in this case, 322 00:22:58,880 --> 00:23:04,160 Speaker 1: a Washington, D c. Based organization, the Institute for International Finance, 323 00:23:04,240 --> 00:23:06,919 Speaker 1: which has about four hundred and fifty members, most of 324 00:23:06,920 --> 00:23:14,000 Speaker 1: them are financial institutions. They stepped forward on April nine 325 00:23:14,080 --> 00:23:18,040 Speaker 1: and wrote a letter to the official sector actors, in 326 00:23:18,119 --> 00:23:27,919 Speaker 1: effect offering the cooperation of commercial creditors in this stand 327 00:23:28,000 --> 00:23:34,000 Speaker 1: still initiative. So, in this case, they have raised their 328 00:23:34,040 --> 00:23:39,520 Speaker 1: hand and purported to be the mouthpiece for the private 329 00:23:39,800 --> 00:23:43,840 Speaker 1: sector community in this Now, there are many institutions that 330 00:23:43,880 --> 00:23:46,760 Speaker 1: do not belong to the i F and might dispute 331 00:23:46,800 --> 00:23:51,040 Speaker 1: whether they are a legitimate spokesperson. But in this case, 332 00:23:51,119 --> 00:23:54,959 Speaker 1: that's that's how it was done. And the G twenty, 333 00:23:55,119 --> 00:24:01,000 Speaker 1: in its subsequent communicate, and which had announced that bilateral 334 00:24:01,080 --> 00:24:05,679 Speaker 1: creditors were going to provide a suspension of payments for 335 00:24:05,720 --> 00:24:09,199 Speaker 1: the balance of this year, actually identified the i F 336 00:24:09,720 --> 00:24:15,440 Speaker 1: as the coordinator for the commercial creditors. And so you said, 337 00:24:15,480 --> 00:24:19,639 Speaker 1: initially the private commercial creditors that they're willing to participate 338 00:24:19,680 --> 00:24:22,520 Speaker 1: in some sort of program, then have gotten cold feed. 339 00:24:23,200 --> 00:24:27,040 Speaker 1: How do they couch that? Did they? I? Presumably I 340 00:24:27,119 --> 00:24:29,720 Speaker 1: presume they don't just say, now you know what we'd 341 00:24:29,720 --> 00:24:31,920 Speaker 1: like all our money and we want to be paid. First, 342 00:24:31,920 --> 00:24:34,280 Speaker 1: I presume that they have some sort of higher minded, 343 00:24:34,320 --> 00:24:38,000 Speaker 1: theoretical sounding argument, But what is there, as you say, 344 00:24:38,040 --> 00:24:39,760 Speaker 1: it's fallen apart. But how do they how do they 345 00:24:39,800 --> 00:24:44,639 Speaker 1: put their complaints with your program? Well, they sent a 346 00:24:44,880 --> 00:24:49,000 Speaker 1: subsequent letter on me the first which said, we've been 347 00:24:49,040 --> 00:24:54,320 Speaker 1: consulting our members and we feel we should bring to 348 00:24:54,400 --> 00:24:58,440 Speaker 1: the attention of the official sector the many obstacles that 349 00:24:58,760 --> 00:25:03,760 Speaker 1: private sector creditor as will face. First, in their view, 350 00:25:04,280 --> 00:25:08,800 Speaker 1: the initiative must be wholly voluntary. That is, any creditor 351 00:25:08,840 --> 00:25:14,399 Speaker 1: who doesn't want to participate is perfectly free not to participate. Parentheses, 352 00:25:14,600 --> 00:25:18,680 Speaker 1: That is somewhat inconsistent with another principle that they espouse, 353 00:25:18,800 --> 00:25:22,760 Speaker 1: which is inter creditor equity one for all and all 354 00:25:22,800 --> 00:25:27,440 Speaker 1: for one. If everyone can opt out and everyone can 355 00:25:27,640 --> 00:25:34,200 Speaker 1: negotiate different terms, you're not going to have inter creditor equity. Uh. Second, 356 00:25:34,320 --> 00:25:39,880 Speaker 1: they said, in order to do this, individual creditor institutions 357 00:25:39,920 --> 00:25:44,760 Speaker 1: are going to have to calculate the net present value 358 00:25:44,840 --> 00:25:49,160 Speaker 1: cost of this deferment and offset it either by raising 359 00:25:49,400 --> 00:25:55,920 Speaker 1: interest rates or getting official sector guarantees for the deferred amounts. 360 00:25:56,280 --> 00:26:01,520 Speaker 1: In addition, each institution or some atituitions these certainly the 361 00:26:01,520 --> 00:26:05,080 Speaker 1: asset managers will have fiduciary duties. They will have to 362 00:26:05,160 --> 00:26:08,879 Speaker 1: explain to their investors why they are voluntarily agreeing to 363 00:26:09,000 --> 00:26:13,679 Speaker 1: defer receipt of interest payments, and that will be a 364 00:26:13,760 --> 00:26:18,200 Speaker 1: challenge for some of those institutions. So it was a 365 00:26:18,240 --> 00:26:23,600 Speaker 1: long list. It was not a disavowal of their prior commitment. 366 00:26:23,760 --> 00:26:29,120 Speaker 1: It was a preview of the many difficulties that would 367 00:26:29,119 --> 00:26:35,040 Speaker 1: attend this, and they said that these arrangements must be 368 00:26:35,160 --> 00:26:40,920 Speaker 1: negotiated creditor by creditor, maybe instrument by instrument, and that 369 00:26:41,000 --> 00:26:46,520 Speaker 1: process alone could easily eat up the balance of I 370 00:26:46,560 --> 00:26:49,560 Speaker 1: wanted to go back to the issuance point that Mitto 371 00:26:50,119 --> 00:26:54,200 Speaker 1: made private creditors basically arguing, well, why don't emerging markets 372 00:26:54,320 --> 00:26:59,160 Speaker 1: just sell that normally into the market. Somewhat surprisingly, we 373 00:26:59,280 --> 00:27:02,640 Speaker 1: have seen in a bunch of e M bonds sold recently. 374 00:27:02,760 --> 00:27:05,919 Speaker 1: I was just looking at um Sri Lanka's debt and 375 00:27:05,960 --> 00:27:08,720 Speaker 1: that's trading at distress levels. But there are some cell 376 00:27:08,800 --> 00:27:12,200 Speaker 1: side analysts that are issuing by recommendations on Sri Lanka, 377 00:27:12,240 --> 00:27:14,560 Speaker 1: of all things, in the middle of this global crisis. 378 00:27:15,240 --> 00:27:18,919 Speaker 1: How are these countries still able to issue debt and 379 00:27:19,240 --> 00:27:22,680 Speaker 1: what are the buyers thinking? At this point? I am 380 00:27:22,880 --> 00:27:28,560 Speaker 1: completely bit fuddled. Maybe Lee or Ugo can explain this, 381 00:27:28,720 --> 00:27:36,400 Speaker 1: but I have been watching this truly bizarre phenomenon of countries. 382 00:27:37,359 --> 00:27:42,760 Speaker 1: You know, take Guatemala, Paraguay, Mexico, countries that are in 383 00:27:43,080 --> 00:27:50,080 Speaker 1: very deep distress that if you read there prospectuses explained 384 00:27:50,200 --> 00:27:54,240 Speaker 1: to the market. Look, we have no remittances coming in, 385 00:27:54,680 --> 00:28:01,000 Speaker 1: our tourism sector is destroyed. Our primary commodity, say hypothetically 386 00:28:01,400 --> 00:28:06,480 Speaker 1: oil in Mexico is down in the doll drums. We 387 00:28:06,560 --> 00:28:11,480 Speaker 1: have shut our borders, we do not have adequate health 388 00:28:11,520 --> 00:28:17,119 Speaker 1: care facilities, and then they're able to raise billions on 389 00:28:17,200 --> 00:28:20,760 Speaker 1: the markets. I am there fuddled. But I do not 390 00:28:21,240 --> 00:28:25,040 Speaker 1: think that the argument that is being made by some 391 00:28:25,680 --> 00:28:29,240 Speaker 1: that oh, this is a sign that everything is well 392 00:28:29,280 --> 00:28:32,320 Speaker 1: and we do not need to provide relief holds. I 393 00:28:32,359 --> 00:28:36,840 Speaker 1: think that is utterly ludicrous and dangerous for us to 394 00:28:38,080 --> 00:28:42,480 Speaker 1: um use as a projection for what will come. But 395 00:28:43,000 --> 00:28:49,320 Speaker 1: you that argument is being made, especially by some who 396 00:28:49,400 --> 00:28:53,240 Speaker 1: do not want to provide relief. They are much happier 397 00:28:54,080 --> 00:28:57,920 Speaker 1: to sell bonds, to buy those bonds at very high 398 00:28:58,000 --> 00:29:02,239 Speaker 1: interest rates, although I should ex caveat that with the 399 00:29:02,360 --> 00:29:06,160 Speaker 1: interest rates are not nearly as a high as I 400 00:29:06,200 --> 00:29:08,800 Speaker 1: would think them to be. But you know, maybe Lee 401 00:29:08,920 --> 00:29:13,320 Speaker 1: or Hugo has a more sort of rational The markets 402 00:29:13,680 --> 00:29:18,720 Speaker 1: understand everything at price, every risk perspective. But I am 403 00:29:19,200 --> 00:29:24,720 Speaker 1: just completely the funneled well that the countervailing factor, I 404 00:29:24,800 --> 00:29:29,040 Speaker 1: think is the tsunami of quantitative easing that's occurred in 405 00:29:29,080 --> 00:29:32,280 Speaker 1: the last two months. You just have a wall of 406 00:29:32,400 --> 00:29:36,200 Speaker 1: money that centered the market. It must go somewhere. Uh. 407 00:29:36,520 --> 00:29:41,560 Speaker 1: The interest rates on the bonds of developed countries like 408 00:29:41,680 --> 00:29:46,160 Speaker 1: the United States or the Europeans are near zero or 409 00:29:46,280 --> 00:29:51,760 Speaker 1: below zero. So if you're an institutional investor, you must 410 00:29:51,760 --> 00:29:55,760 Speaker 1: find a home for all of this money someplace, and 411 00:29:56,000 --> 00:30:02,800 Speaker 1: that perhaps eclipses you a normal risk aversion in assessing 412 00:30:02,880 --> 00:30:20,960 Speaker 1: some of these investments. I have to say it sounds 413 00:30:21,400 --> 00:30:24,479 Speaker 1: me too. And actually both of the both sides of 414 00:30:24,520 --> 00:30:28,840 Speaker 1: this debate feel very much like the debate around basically 415 00:30:28,880 --> 00:30:32,760 Speaker 1: every asset class in the world right now, including US equities, 416 00:30:32,840 --> 00:30:36,440 Speaker 1: in which you look at the fundamental this makes no sense, 417 00:30:36,640 --> 00:30:40,560 Speaker 1: unemployment expected to shoot. And then the other side of 418 00:30:40,560 --> 00:30:43,960 Speaker 1: that coin is yes, but there is all this extraordinary 419 00:30:44,000 --> 00:30:47,520 Speaker 1: intervention happening one way. It's going to have the resolve, presumably, 420 00:30:47,920 --> 00:30:51,200 Speaker 1: but the debate about how the E M bond world 421 00:30:51,240 --> 00:30:54,040 Speaker 1: continues to trade and raise money feels just like a 422 00:30:54,080 --> 00:30:57,360 Speaker 1: microcosm of literally every other asset class debate we have 423 00:30:57,480 --> 00:31:02,080 Speaker 1: these days. I was going to flag one of my 424 00:31:02,280 --> 00:31:08,240 Speaker 1: favorite countries in good times, which is the Maldives, which 425 00:31:08,280 --> 00:31:12,640 Speaker 1: are very close to my home in Kerala, just a 426 00:31:12,680 --> 00:31:16,560 Speaker 1: forty five minutes flight away. And you know normally that 427 00:31:16,560 --> 00:31:21,040 Speaker 1: that their economics are quite good because they have such 428 00:31:21,080 --> 00:31:29,960 Speaker 1: a booming tourism sector. But they are completely dependent on tourism. 429 00:31:30,000 --> 00:31:33,880 Speaker 1: I think it's close to seventy of their GDP comes 430 00:31:33,960 --> 00:31:38,160 Speaker 1: from tourism or tourism related activities. They have a small 431 00:31:38,200 --> 00:31:42,880 Speaker 1: portion of their economy that comes from sales of fish 432 00:31:43,320 --> 00:31:51,200 Speaker 1: uh and they do not have anything resembling a meaningful 433 00:31:51,280 --> 00:31:53,840 Speaker 1: health sector. Part of the reason I know a lot 434 00:31:53,880 --> 00:31:59,280 Speaker 1: about the Maldives is people from the Maldives workers come 435 00:31:59,360 --> 00:32:04,080 Speaker 1: to India for even the most basic healthcare needs. Now, 436 00:32:04,160 --> 00:32:08,680 Speaker 1: in the current situation, they are down to zero, no tourists, 437 00:32:09,680 --> 00:32:15,840 Speaker 1: fish prices gone down to the bottom, They're having multiple 438 00:32:16,000 --> 00:32:20,880 Speaker 1: COVID nineteen outbreaks, and they can't send their citizens to 439 00:32:21,000 --> 00:32:25,680 Speaker 1: India because the flights are all closed. Now, this is 440 00:32:25,800 --> 00:32:31,200 Speaker 1: not temporary. This country is going to find it incredibly 441 00:32:31,320 --> 00:32:37,440 Speaker 1: hard to recover even in the medium term. So you 442 00:32:37,480 --> 00:32:41,200 Speaker 1: know that the estimates from both the official sector and 443 00:32:41,320 --> 00:32:45,600 Speaker 1: the private markets are much more optimistic in this case 444 00:32:46,120 --> 00:32:51,560 Speaker 1: than I think reality requires. But I wonder whether it 445 00:32:51,720 --> 00:32:55,760 Speaker 1: is a window into what's happening in the rest of 446 00:32:55,800 --> 00:32:59,560 Speaker 1: the world that we are just refusing to face the 447 00:32:59,640 --> 00:33:02,400 Speaker 1: reality of how bad this is. But I am a pessimist, 448 00:33:02,480 --> 00:33:06,400 Speaker 1: so hopefully I am wrong. Um, just on that time 449 00:33:06,440 --> 00:33:09,840 Speaker 1: horizon point. I mean, this theme tends to come up 450 00:33:09,920 --> 00:33:12,520 Speaker 1: over and over again whenever people are talking about debt 451 00:33:12,520 --> 00:33:16,160 Speaker 1: relief or debt stand stills. If you give people a 452 00:33:16,200 --> 00:33:19,760 Speaker 1: grace period now, um, for instance, in the US, like 453 00:33:19,840 --> 00:33:22,920 Speaker 1: for certain things they are granting grace periods, does that 454 00:33:23,000 --> 00:33:26,040 Speaker 1: save up the problem for a later date? And how 455 00:33:26,040 --> 00:33:28,600 Speaker 1: do you manage the exit process? How do you make 456 00:33:28,600 --> 00:33:32,520 Speaker 1: sure that a borrower doesn't end up owing all of 457 00:33:32,560 --> 00:33:34,640 Speaker 1: the money for the past six months that they should 458 00:33:34,640 --> 00:33:36,800 Speaker 1: owe and they have to pay it in one big 459 00:33:37,200 --> 00:33:41,080 Speaker 1: lump sum lump payment. How do you actually manage that? 460 00:33:41,120 --> 00:33:45,080 Speaker 1: And how do you ensure that you're not saving up 461 00:33:45,440 --> 00:33:49,400 Speaker 1: a problem for the for a later date. Tracy is 462 00:33:49,880 --> 00:33:56,240 Speaker 1: concern the G twenty, when they announced the bilateral debt suspension, 463 00:33:57,000 --> 00:34:02,360 Speaker 1: proposed that they deferred interest and in their case, principal 464 00:34:02,400 --> 00:34:06,480 Speaker 1: payments would be due over a four year period with 465 00:34:06,680 --> 00:34:09,279 Speaker 1: one year of grace, so one year in which no 466 00:34:09,480 --> 00:34:13,800 Speaker 1: principle is repaid, and then another three years. That was 467 00:34:14,000 --> 00:34:19,040 Speaker 1: their proposal for how to smooth out this problem. The 468 00:34:20,000 --> 00:34:25,480 Speaker 1: thinking on this is that at the moment it is 469 00:34:25,520 --> 00:34:31,240 Speaker 1: simply not possible for anyone to prepare a debt sustainability 470 00:34:31,320 --> 00:34:38,719 Speaker 1: analysis for any of these countries, that is, in which 471 00:34:38,760 --> 00:34:41,839 Speaker 1: one can repose confidence. Put it that way, there are 472 00:34:41,880 --> 00:34:46,799 Speaker 1: simply too many variables. When does this crisis end? What 473 00:34:46,960 --> 00:34:50,319 Speaker 1: will commodity prices look like when it ends, What will 474 00:34:50,400 --> 00:34:54,040 Speaker 1: export markets look like, What will the tourism industry look like? 475 00:34:54,120 --> 00:34:57,040 Speaker 1: What will the financial markets look like? Those are shrieking 476 00:34:57,160 --> 00:35:01,799 Speaker 1: unknowns at this point in time. Hopefully by the end 477 00:35:01,840 --> 00:35:07,400 Speaker 1: of this year some of those issues will begin to 478 00:35:07,520 --> 00:35:12,759 Speaker 1: be able to be analyzed, and that would allow the 479 00:35:12,840 --> 00:35:18,480 Speaker 1: I m F to begin to assess longer term debt sustainability. 480 00:35:18,520 --> 00:35:22,600 Speaker 1: As I said, a moment ago, we should not expect 481 00:35:22,880 --> 00:35:28,560 Speaker 1: to leave with only four or five countries facing the 482 00:35:28,640 --> 00:35:31,799 Speaker 1: need for a full scale debt restructuring. I think there'll 483 00:35:31,840 --> 00:35:36,040 Speaker 1: be many more. But who's on the list and how 484 00:35:36,080 --> 00:35:39,640 Speaker 1: severe is that debt restructuring at the moment, no one 485 00:35:39,719 --> 00:35:43,839 Speaker 1: I think can predict. So, just on that note, if 486 00:35:43,880 --> 00:35:47,560 Speaker 1: we're looking forward and we think that the world and 487 00:35:47,640 --> 00:35:50,560 Speaker 1: emerging markets especially are going to come out of the 488 00:35:50,560 --> 00:35:53,920 Speaker 1: current crisis owing more money, if we think that we're 489 00:35:53,920 --> 00:35:56,120 Speaker 1: going to get a bunch of restructurings, it's just a 490 00:35:56,200 --> 00:35:59,479 Speaker 1: question of how many and who's first, and who sort 491 00:35:59,480 --> 00:36:02,680 Speaker 1: of needs it most. Is that maybe is that an 492 00:36:02,760 --> 00:36:09,080 Speaker 1: opportunity perhaps to rethink the way emerging markets are funded 493 00:36:09,280 --> 00:36:12,560 Speaker 1: or just sort of hit reset on the way this 494 00:36:12,640 --> 00:36:17,480 Speaker 1: whole system um actually works. I'm trying to end on 495 00:36:17,520 --> 00:36:20,239 Speaker 1: a sort of optimistic note, But do you see an opportunity? 496 00:36:20,520 --> 00:36:23,279 Speaker 1: You stole my question, literally the question I was going 497 00:36:23,320 --> 00:36:25,279 Speaker 1: to ask. No, no, no no, it's perfect, it's great, this 498 00:36:25,360 --> 00:36:27,560 Speaker 1: could be the last that's uh. You You and I 499 00:36:27,600 --> 00:36:29,560 Speaker 1: were in the exact had the exact same thought at 500 00:36:29,560 --> 00:36:33,520 Speaker 1: the same time. So my mouth, my mouth, Yeah, whogo 501 00:36:33,719 --> 00:36:37,239 Speaker 1: is our optimists? Let's lett him in I don't know. 502 00:36:37,360 --> 00:36:41,160 Speaker 1: I mean, I've been pushing for a long time towards 503 00:36:41,239 --> 00:36:45,839 Speaker 1: this idea of using more contingent that instruments, and so 504 00:36:45,880 --> 00:36:50,600 Speaker 1: far they haven't worked. We can tell you of many 505 00:36:50,640 --> 00:36:55,200 Speaker 1: cases in which countries have paid dearly to try to use, 506 00:36:55,600 --> 00:36:59,160 Speaker 1: you know, issue GDP index bonds in the sense that 507 00:36:59,239 --> 00:37:02,640 Speaker 1: they that price when things were going well, without getting 508 00:37:02,640 --> 00:37:06,719 Speaker 1: anything when things were going badly. So if we could 509 00:37:06,719 --> 00:37:09,839 Speaker 1: go in that direction, that would be great. Even though 510 00:37:09,880 --> 00:37:13,520 Speaker 1: I'm the optimistic guy, I'm not very optimistic, but I 511 00:37:13,520 --> 00:37:18,480 Speaker 1: don't know what Lee put that on this well. The 512 00:37:18,600 --> 00:37:23,680 Speaker 1: current effort by some in the official community is to 513 00:37:23,719 --> 00:37:26,680 Speaker 1: try to figure out a way in which we can 514 00:37:26,800 --> 00:37:33,359 Speaker 1: deal with multiple sovereign debt restructurings going on simultaneously. We 515 00:37:33,440 --> 00:37:36,880 Speaker 1: did that in the eighties, but of course the creditor 516 00:37:37,000 --> 00:37:40,160 Speaker 1: universe was a much more hum a genious group of 517 00:37:40,200 --> 00:37:46,560 Speaker 1: commercial banks. Arguably we did it starting in with the 518 00:37:46,680 --> 00:37:50,360 Speaker 1: Brady initiative, and that's what some in the official sector 519 00:37:50,440 --> 00:37:55,080 Speaker 1: are looking at. Is it possible to replicate a template 520 00:37:55,920 --> 00:38:00,200 Speaker 1: for how a sovereign debt restructuring could be done so 521 00:38:00,440 --> 00:38:03,640 Speaker 1: that if we are faced with the situation in which 522 00:38:03,680 --> 00:38:07,319 Speaker 1: there are ten or twenty or thirty countries going through 523 00:38:07,320 --> 00:38:10,799 Speaker 1: the process at the same time. They would not have 524 00:38:10,920 --> 00:38:16,279 Speaker 1: to each individually and in the spoke manner attempt to 525 00:38:16,280 --> 00:38:22,839 Speaker 1: figure out how to implement a dead restructuring that's right 526 00:38:22,880 --> 00:38:29,839 Speaker 1: now the subject of investigation by some of the official sect. Okay, well, 527 00:38:29,880 --> 00:38:34,560 Speaker 1: on that sort of optimistic note, but not necessarily. We're 528 00:38:34,560 --> 00:38:37,680 Speaker 1: going to leave it there, Ugo, mit too, and we 529 00:38:37,920 --> 00:38:40,040 Speaker 1: thank you so much for being on and for that 530 00:38:40,080 --> 00:38:44,120 Speaker 1: fascinating conversation. Thanks very much, good to be with you. 531 00:38:44,600 --> 00:38:48,560 Speaker 1: Thank you, thank you. Yeah, that was great, appreciate it. 532 00:38:48,600 --> 00:39:00,359 Speaker 1: Thank you so, Joe. I found that conversation fascinating, as 533 00:39:00,400 --> 00:39:02,640 Speaker 1: I mentioned, and I know you're fond of saying that 534 00:39:02,800 --> 00:39:06,439 Speaker 1: people don't necessarily need to worry about debt. In fact, 535 00:39:06,480 --> 00:39:08,600 Speaker 1: I can see you tweeting that just a few hours ago. 536 00:39:08,840 --> 00:39:13,520 Speaker 1: But that really only applies, I think to some developed markets, right, 537 00:39:13,560 --> 00:39:16,720 Speaker 1: and e M, you can and probably should worry about 538 00:39:16,760 --> 00:39:19,320 Speaker 1: the debt. Yes, I think there is a very different 539 00:39:19,360 --> 00:39:24,480 Speaker 1: conversation when you think about debt sustainability and the cost 540 00:39:24,560 --> 00:39:29,080 Speaker 1: of borrowing and all these countries in the e M 541 00:39:29,320 --> 00:39:34,359 Speaker 1: versus the developed market context, and what this conversation really 542 00:39:34,440 --> 00:39:37,960 Speaker 1: drives home is that you know, it's so complicated to 543 00:39:38,040 --> 00:39:41,000 Speaker 1: just get in the short term debt relief or sort 544 00:39:41,000 --> 00:39:44,080 Speaker 1: of that, when, as a lead pointed out, when it 545 00:39:44,160 --> 00:39:47,000 Speaker 1: actually gets to the point about looking at sustainability of 546 00:39:47,040 --> 00:39:49,759 Speaker 1: the overall debt stock, it really does decided just going 547 00:39:49,800 --> 00:39:52,680 Speaker 1: to be mind bogglingly difficult challenge for the world in 548 00:39:52,719 --> 00:39:56,239 Speaker 1: the years ahead, even if the virus itself fades. Is 549 00:39:56,280 --> 00:39:59,360 Speaker 1: a problem. Yeah, I mean, the complexity, you're right, is 550 00:39:59,440 --> 00:40:01,920 Speaker 1: what really stands out. You have all these different creditors, 551 00:40:01,960 --> 00:40:06,600 Speaker 1: all these different claims, you have public, private, foreign um 552 00:40:06,600 --> 00:40:11,120 Speaker 1: and domestic creditors. I don't even know how how you 553 00:40:11,160 --> 00:40:13,960 Speaker 1: would begin, but you know, kudos to the three of 554 00:40:13,960 --> 00:40:17,360 Speaker 1: those guys. They're trying to put this together. Yeah. No, 555 00:40:17,600 --> 00:40:20,439 Speaker 1: in terms of the immediate need, like I think there's 556 00:40:20,440 --> 00:40:24,399 Speaker 1: an agreement the immediate need everywhere is cash, right, Like 557 00:40:24,520 --> 00:40:27,160 Speaker 1: it's the cash isn't going to solve the health crisis, 558 00:40:27,360 --> 00:40:30,480 Speaker 1: but cash can keep people solving, keep people paying their bills, 559 00:40:30,560 --> 00:40:35,319 Speaker 1: keep paying doctors and so forth. And so there does 560 00:40:35,360 --> 00:40:37,759 Speaker 1: seem to be this recognition that we don't need to 561 00:40:37,800 --> 00:40:39,920 Speaker 1: make the first part of this too complex. We just 562 00:40:39,960 --> 00:40:41,799 Speaker 1: need to free up cash, and that's even true in 563 00:40:41,800 --> 00:40:44,160 Speaker 1: the U S. Contact. Yeah, and I guess it would 564 00:40:44,200 --> 00:40:47,759 Speaker 1: be interesting to see if um the urgency of this 565 00:40:47,800 --> 00:40:50,719 Speaker 1: particular crisis makes people realize that they do need to 566 00:40:50,719 --> 00:40:55,080 Speaker 1: create some sort of template or sovereign restructurings going forward, 567 00:40:55,160 --> 00:40:57,840 Speaker 1: because that's been I mean, we've had so many episodes 568 00:40:57,880 --> 00:41:00,440 Speaker 1: on sovereign debt restructurings because each one of the tends 569 00:41:00,480 --> 00:41:05,160 Speaker 1: to be unique in its complexity and in its particular issues. Yeah, 570 00:41:05,200 --> 00:41:06,880 Speaker 1: you know what I was thinking about too, like a 571 00:41:06,920 --> 00:41:09,920 Speaker 1: little bit. You know, obviously this was a sovereign debt context, 572 00:41:09,960 --> 00:41:12,160 Speaker 1: but I also think about some of our conversations we've 573 00:41:12,160 --> 00:41:15,799 Speaker 1: had with Chris White of private sector debt, and the 574 00:41:15,880 --> 00:41:18,640 Speaker 1: consistent theme is that when you start talking about the 575 00:41:18,680 --> 00:41:22,719 Speaker 1: asset class of debt, it's just infinitely more complex than 576 00:41:22,760 --> 00:41:26,120 Speaker 1: any other asset classes because of how many different versions are. 577 00:41:26,160 --> 00:41:28,920 Speaker 1: I mean, you think about like there's one Microsoft stock 578 00:41:29,040 --> 00:41:32,200 Speaker 1: right MSFT you want to look at like debt or 579 00:41:32,239 --> 00:41:34,239 Speaker 1: I don't know Microsoft has debt. I know, I'm sure 580 00:41:34,280 --> 00:41:37,480 Speaker 1: they do, but it's get it gets infinitely more complex 581 00:41:37,760 --> 00:41:40,080 Speaker 1: right away, and the number of in the difficulty of 582 00:41:40,120 --> 00:41:43,080 Speaker 1: trading that and coordinating that and so then you think 583 00:41:43,080 --> 00:41:46,359 Speaker 1: about this on an international level, all the different things 584 00:41:46,360 --> 00:41:49,279 Speaker 1: that make public sector that way more complex, and it 585 00:41:49,440 --> 00:41:51,480 Speaker 1: just yeah, it's mind boggling. And that's why there have 586 00:41:51,520 --> 00:41:54,960 Speaker 1: been certain stories, like say Argentina that have been in 587 00:41:55,000 --> 00:41:57,000 Speaker 1: the news for like twenty years, because and that's just 588 00:41:57,040 --> 00:42:00,000 Speaker 1: one one, one country. Yeah, and it's the same story 589 00:42:00,239 --> 00:42:03,000 Speaker 1: pretty much over and over and over all. Right, Um, 590 00:42:03,239 --> 00:42:04,920 Speaker 1: should we leave it there? You know what, I just 591 00:42:04,960 --> 00:42:06,799 Speaker 1: want to say one other things I love I mean, 592 00:42:07,000 --> 00:42:09,880 Speaker 1: I didn't love it, but mid twos comment about you know, 593 00:42:10,120 --> 00:42:12,719 Speaker 1: he's pessimistic, but he'd like to be proven wrong. I 594 00:42:12,760 --> 00:42:15,120 Speaker 1: feel like the amount of times I've said some version 595 00:42:15,160 --> 00:42:16,920 Speaker 1: of that over the last few months, I'd like to 596 00:42:16,920 --> 00:42:19,360 Speaker 1: be shown that I'm wrong. There's a really sort just 597 00:42:19,440 --> 00:42:22,839 Speaker 1: because there's so many sort of bleak ways that this 598 00:42:22,880 --> 00:42:25,279 Speaker 1: could all go extremely bad. Well, I think if you're 599 00:42:25,280 --> 00:42:27,120 Speaker 1: a bear right now and you're going and I hope 600 00:42:27,160 --> 00:42:30,400 Speaker 1: I'm right, that would probably be a not very popular 601 00:42:30,480 --> 00:42:35,080 Speaker 1: position to be taking taste Taste Well. This has been 602 00:42:35,160 --> 00:42:38,680 Speaker 1: another episode of the All Thoughts podcast. I'm Tracy Alloway. 603 00:42:38,800 --> 00:42:41,759 Speaker 1: You can follow me on Twitter at Tracy Alloway, and 604 00:42:41,800 --> 00:42:44,440 Speaker 1: I'm Joe wisn'tal. You could follow me on Twitter at 605 00:42:44,480 --> 00:42:47,520 Speaker 1: The Stalwart, and you should follow our producer on Twitter, 606 00:42:47,600 --> 00:42:51,359 Speaker 1: Laura Carlson at Laura M Carlson. Follow the Bloomberg head 607 00:42:51,400 --> 00:42:55,080 Speaker 1: of podcast, Francesca Levi at Francesca Today, as well as 608 00:42:55,120 --> 00:42:58,839 Speaker 1: all of the Bloomberg podcasts under the handle at podcasts. 609 00:42:59,000 --> 00:43:12,600 Speaker 1: Thanks for listening to