Official Debt Restructurings and Development

32 Pages Posted: 15 Jun 2018 Last revised: 29 Apr 2020

See all articles by Gong Cheng

Gong Cheng

European Stability Mechanism

Javier Diaz-Cassou

London School of Economics & Political Science (LSE)

Aitor Erce


Date Written: 2018-04-20


Despite the frequency of official debt restructurings, little systematic evidence has been produced on their characteristics and implications. Using a dataset covering more than 400 Paris Club agreements, this paper fills that gap. It provides a comprehensive description of the evolving characteristics of these operations and studies their impact on debtors. The progressive introduction of new terms of treatment gradually turned the Paris Club from an institution primarily concerned with preserving creditors’ claims into an instrument to foster development in the world’s poorer nations, among other objectives. Our study finds that more generous restructuring conditions involving nominal relief are associated with an acceleration of per capita GDP growth, a reduction of poverty and inequality, and an increase in public health budgets. We also find that countries receiving nominal relief tend to receive lower aid flows subsequently, the opposite being the case for countries receiving high reductions in the net present value of their obligations, but no nominal haircuts.

Keywords: Official debt, sovereign debt restructuring, Paris Club

JEL Classification: F33, F34, F36, F53, H63

Suggested Citation

Cheng, Gong and Diaz-Cassou, Javier and Erce, Aitor, Official Debt Restructurings and Development (2018-04-20). Globalization and Monetary Policy Institute Working Paper No. 339, Available at SSRN: or

Gong Cheng (Contact Author)

European Stability Mechanism ( email )

6a Circuit de la Foire Internationale

Javier Diaz-Cassou

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

Aitor Erce

UPNA ( email )


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