Debt moratorium

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A debt moratorium is a delay in the payment of debts or obligations. The term is generally used to refer to acts by national governments. Moratory laws are usually passed at times of special political or commercial stress: for instance, on several occasions during the Franco-Prussian War, the French government passed moratory laws. Their international validity was discussed at length, and was upheld in the English law case Rouquette v Overman (1875) LR 10 QB. Debt moratoriums are generally opposed by creditors.

Proponents of debt moratoriums argue that it is a sovereign decision by the government of a nation to suspend repayment of debt to its creditors, if to do otherwise would do irreparable harm to the welfare of its citizenry. A debt moratorium may take the form of a complete cessation of debt repayments, or a partial cessation: for example, the government of President Alan García of Peru implemented the so-called "Ten Per Cent Solution", when it was announced that only 10% of export earnings would go to debt payment.

Nations which have, at one time or another, declared a debt moratorium include Peru, Pakistan,[1] Brazil, Mexico, Russia, and Argentina. The most recent addition to this group is Ecuador, which entered a technical moratorium on its foreign debt on 14 November 2008. Ecuador stopped all payments on its 2012 bond, but has continued on the 2015 bond.

Several European countries introduced various debt moratoria in connection with the consequences of the COVID-19 pandemic.[2] On 4 April 2021, Supreme Court of India also asked the PSU banks in India for Interest waiver on loans for the moratorium of loans taken by citizens of India during pandemic lockdown, which is going to cause a loss of 2000 crores to Banks in India.

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References[]

  1. ^ Siddiqui, R. & Siddiqui, R. (2001). Determinants of Debt Rescheduling in Pakistan. The Pakistan Development Review, 40(4).
  2. ^ "COVID19 Overview on moratoria". www.schoenherr.eu. Retrieved 13 November 2020.
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