Domestic Debt Restructuring (DDR) is necessary and viable.
The term debt restructuring includes three possibilities extension of maturities (re-profiling), coupon resets or reduction of the principal. There is no fourth option. Principal haircuts are generally avoided, and they are not necessary. Re-profiling and coupon resets are sufficient to achieve policy goals.
Why restructure domestic debt?
We are in the throes of an unprecedented economic crisis. The current prescription a ham-fisted approach of tax extortion and reducing the current account deficit by blocking legit repatriation of capital, dividends, and settlement of letters of credit has significantly damaged investor confidence. It has penalised businesses long faithful to…
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