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Debt Rescheduling

Debt rescheduling is the lengthening the time of debt repayment and forgiving, or dismissing, part of the loan for a date. A practice that involves restructuring the terms of an existing loan in order to extend the repayment period. Debt rescheduling may mean a reducing payment amounts by extending the payment period and increasing the number of payments or delay in the due date of required payments.


Debt Negotiators Challenges

Debt rescheduling

Debt negotiators face great challenges in their dealings with their creditors. They have to deal with the difficult situation and pressures created by the governance problems in their respective countries, as well as with the shortages of skilled personnel and of time to prepare for negotiations. Nevertheless, these challenges can be met if the people who participate in the negotiations and re-negotiations know the procedures, rules and regulations implemented by creditors in order to carry out these negotiations. In addition, there is a real need for debt negotiators around the world to share information and best practice on their dealings with official creditors.

Studying Debt Reshedulement

Studying debt reshedulement is intended to develop the knowledge and skills of participants to negotiate with the creditors and to allow participants and institutions to understand how best to establish strategies and tactics for these negotiations. Hands-on and practical information will be provided in this course, based on the experience of experts who have attended actual negotiation and re-negotiation sessions and meetings. This course will also provide ample opportunities for sharing of experiences and country case studies using our online discussion board facility.

Process of negotiating new obligations to replace existing loans, either by lengthening maturities, deferring of loan principal payments, or reducing interest rates, where the alternative is Default by the borrower and seizure of collateral by the lender. In commercial lending, rescheduling can take the form of a Troubled Debt Restructuring, in which the lender offers the borrower a concession, such as a lower rate of interest, that it would not consider ordinarily.

Where an economy cannot meet its external debt service obligations, it is forced to appeal to creditors for rescheduling of the debt. As such, rescheduling is evidence of a country's incapacity to carry a debt burden. The current literature is extended by modelling a dynamic random effects panel probit, in order to identify a presence of state dependence after controlling for country heterogeneity. We find clear evidence of state dependence when a two-year lag of the dependent variable is allowed for, suggesting that overall, the fact that a country has experienced a rescheduling arrangement in the past does indeed make them more likely to experience further rescheduling.

In loans to less developed countries, debt rescheduling is often carried out jointly with financial aid agreements, such as multi-year Structural Adjustments supervised by the International Monetary Fund, which are intended to encourage internal economic reforms and increased private sector participation in the economy of the debtor nation.


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