Likelihood, two years: 2Unlikely; to end-2028
Likelihood, ten years: 3Possible; to end-2036
Systemic impact: 3Significant; global
National impact: 4Major; typical highly exposed nation
Onset pace: Months
Duration (acute phase): 5 years
Warning time: Months
Scope: Global (at least 25 states)
Recovery horizon: Years
Capability load: Hard 1/3Soft 2/3Economic 1/3; domains loaded High
Concurrency: Standalone; triggers 6 · triggered by 6
Confidence · movement: medium; new

Rated at Standard Severe. Event reach: global event. Source of scores: model-panel-v0.5. Upside scenario: impact levels measure the scale of change, not loss.

Capture test: results by nation

03Narrative

Dateline: November 2031

The common framework was adopted in March 2030 by the main official bilateral creditors, Chinese state lenders and a committee representing the largest bondholders. It set one sequence for every case: a debt sustainability analysis published within 60 days, a single creditor committee, comparable treatment enforced by a most-favoured-creditor clause and a standstill on payments while terms were agreed. Legislation passed in New York and London the previous year limited what a holdout creditor could recover in court.

By September 2031, 27 states had concluded agreements. Most were in Africa, with others in South Asia, Latin America and the Caribbean, Central Asia and the Pacific. The terms differed by case but met the same test: external public debt service fell by 40 per cent for five years. Maturities were extended by 12 to 15 years, interest rates were cut and six states received a reduction in principal. Multilateral lenders did not take losses. They committed new concessional loans that could be drawn only against published investment plans and not to repay other creditors.

In one East African finance ministry, interest payments had taken 31 per cent of revenue in 2029. The 2032 budget put them at 18 per cent. The difference was assigned to clinic staffing, primary school construction and a transmission line that had been suspended since 2027. Each allocation was published by project, and contracts above a set value went through an open tender portal reviewed by the national audit office.

Results were uneven. Rating agencies moved every participant to selective default at signing, and 19 had been upgraded by November 2031. Among the 27, GINC identified nine where capital spending rose and was executed, eleven where the release went mainly to wages and subsidies before elections and seven where arrears and state enterprise losses absorbed most of it. Two governments returned to commercial borrowing within a year at rates above those they had just restructured. One agreement was suspended after an audit found contracts awarded without tender.

Creditors recorded losses. Bondholders accepted a reduction in present value of about 30 per cent on average, and two funds pursued litigation that failed under the new statutes. Chinese state lenders extended maturities on most claims and wrote down few. Borrowers that had not applied reported higher spreads for about a year, as investors priced the possibility that they would apply later. Several governments that had cut spending to stay current said the framework favoured those that had not.

The five-year period of reduced payments ends in 2036. Whether the participating states can then service the remaining debt depends on what the released funds bought: revenue administration, schools, power and transport links that raise output, or commitments that must be paid for again.

The dateline is illustrative, not a forecast. The narrative is hypothetical; the historical anchors below are real events.

04Summary

Official bilateral creditors, including China, and private creditors adopt a common restructuring framework and conclude agreements with at least 25 debt-distressed states within 18 months. External public debt service falls by 40 per cent for five years through maturity extensions, interest reductions and selective principal relief. New concessional lending finances essential investment and may not be used to repay creditors. Participating governments regain room for health, education and infrastructure, but must publish credible budgets and run transparent procurement. Creditors take losses and borrowers outside the framework may pay more to borrow. The test is whether fiscal release becomes durable capability, not renewed borrowing or politically allocated spending.

Who gains: At least 25 debt-distressed states that conclude agreements
Their health, education and infrastructure programmes
Households and firms that depend on public services and public investment
Productive investors and exporters selling to recovering economies
Who loses: Bondholders and official bilateral creditors, who accept losses
Borrowers outside the framework, which may face higher financing costs
States that stayed current through spending cuts and receive no relief
Intermediaries that gained from opaque procurement and undisclosed lending

A shock most would count as progress. It is not upside for everyone: each record names who gains and who loses. Impact levels measure the scale of change, in either direction, and loads mark the capabilities a nation needs in order to capture the gain or absorb the loss.

05Historical anchors

Event	Date	What happened	Calibrates
London Debt Agreement	February 1953	West Germany's pre-war and post-war external debt was cut by about half and repayment was spread over about 30 years, with debt service tied to the country's capacity to earn foreign exchange.	Relief designed around capacity to pay can support recovery where the debtor has the institutions to use it.
Brady Plan	1989	From 1989, defaulted commercial bank loans to about 18 countries, mainly in Latin America, were exchanged for tradable bonds with reduced principal or interest, partly backed by US Treasury collateral. Mexico was the first case.	Private creditor participation at scale. It came seven years after the crisis began and needed a choice of instruments to bring banks in.
HIPC Initiative and MDRI	1996 and 2005	The HIPC Initiative, launched in 1996 and enhanced in 1999, and the Multilateral Debt Relief Initiative of 2005 delivered relief worth more than US$100 billion to more than 35 low-income countries. Relief was released in stages against a reform record and a poverty reduction strategy.	The Standard Severe scale and the conditional design. It also marks the limit: several recipients were again at high risk of distress within 15 years.
Debt Service Suspension Initiative	May 2020 to December 2021	The G20 suspended official bilateral debt service for 48 of 73 eligible countries, deferring about US$13 billion. Private creditors did not take part on comparable terms.	Official creditors can act within weeks when they agree. A suspension without private participation defers payments and does not reduce them.
G20 Common Framework	2020 onward	Chad, Zambia, Ghana and Ethiopia sought treatment. Zambia defaulted in November 2020 and completed its bond exchange in 2024. Each case took years to conclude.	Counter-anchor on speed: case-by-case negotiation with separate creditor groups is far slower than this scenario requires.
Sevilla Commitment and Jubilee report	2025	The fourth International Conference on Financing for Development adopted the Sevilla Commitment in mid-2025, and a Vatican-backed commission of economists published the Jubilee report calling for faster and deeper debt treatment.	Current momentum: the intent is stated, but no binding mechanism or creditor coalition has followed.

06Parameters

Shown at their preset values. Parameters are not adjustable in this release and nothing on this page is computed from them. Custom settings run (Phase B) but are labelled 'non-standard run' and excluded from comparisons.

Common variables at Standard Severe · read-only

1. Severity: major
severe (Standard Severe)
extreme
2. Duration (acute phase): 30 days
90 days
1 year
3 years
5 years (Standard Severe)
3. Onset pace: days
weeks
months (Standard Severe)
years
4. Warning time: none
days
months (Standard Severe)
5. Scope: national
regional
global (Standard Severe)
Standard Severe: global (at least 25 states)
6. Origin: natural
accidental
adversarial (great power / neighbour / non-state)
negotiated (Standard Severe)
Standard Severe: negotiated (official and private creditors with debtor states)
7. External support: full (Standard Severe)
partial
none
Standard Severe: full (concessional lending for investment only)
8. Concurrency: standalone (Standard Severe)
plus one named scenario
plus two
9. Policy response assumed: none (pure exposure)
current plans executed (Standard Severe)
best practice
10. Recovery horizon: months
years (Standard Severe)
structural

Scenario-specific parameters · read-only

Parameter	Default	Range or options	Note
States with concluded agreements	25	10 to 50	Counted at 18 months from adoption of the framework.
Reduction in external public debt service	40	20 to 60	Against contracted payments, held for five years.
Time to conclude agreements	18	12 to 36	From adoption of the framework to the last agreement counted.
Creditor participation	official bilateral, including China, and private	options: official only / official and private / multilateral lenders also take losses	Multilateral lenders provide new lending and do not take losses in the default.
Principal relief	selective, case by case	options: none / across the board	Decides how much debt remains when the five-year period ends.
New concessional lending	1	0.5 to 2	Drawn against published investment plans; may not be used to repay creditors.
Conditions on participants	published budgets and open procurement, independently reviewed	options: none / full adjustment programme	The condition under test. With none, the scenario measures release without safeguards.

07Transmission channels

1
Official bilateral and private creditors adopt one framework: a single committee per case, a published debt sustainability analysis, comparable treatment and a payment standstill during talks.
2
At least 25 distressed states apply and conclude agreements within 18 months. Rating agencies move them to selective default at signing.
3
External debt service falls by 40 per cent for five years through longer maturities, lower interest and selective principal relief. Creditors record present-value losses.
4
New concessional lending is committed against published investment plans and cannot be used to repay other creditors.
5
Governments assign the released funds in published budgets to health, education and infrastructure, with contracts awarded through open procurement.
6
Outcomes diverge: states with credible budgets and audit execute investment, while others spend the release on wages, subsidies, arrears or new commercial borrowing.
7
Borrowers outside the framework face higher spreads for a period, and states that stayed current contest the fairness of the terms.
8
After five years debt service rises again. States that raised revenue and output regain market access on better terms, and the others return to distress.

08Capability loading

High: capability band shifts expected under current plans. Medium: band shifts under 'none' policy response only. Low: strain without band shift. Loads are judgement-based until the Atlas connects. Domains link to the Atlas.

Domain	Load	Channel
Hard
Defence and security	Low	Fiscal pressure on security budgets eases; fragility falls where public services recover.
Strategic infrastructure	High	Suspended capital projects restart; delivery depends on project preparation, procurement and maintenance budgets.
Critical technology	Low	Imported equipment and digital systems become affordable again; no direct change in technology.
Soft
Government effectiveness	High	Debt management, budget credibility, procurement and audit decide whether the release is retained.
Human capital	High	Health and education budgets recover; staffing and delivery systems determine the result.
Influence and cohesion	Medium	Creditor relationships shift; participants and states that stayed current dispute the fairness of the terms.
Economic
Macro-financial	High	Debt service, ratings, reserves and market access all change; creditors record losses.
Industry, trade and supply	Medium	Import financing and public contracts recover; domestic suppliers gain where procurement is open.
Energy and resources	Medium	Fuel import capacity improves, resource-backed loans are renegotiated and power investment resumes.

09Stakeholders

Government: Exposure
Debtor governments regain fiscal room under budget and procurement conditions; creditor governments record losses and set the terms.
Actions
Publish all public debt, including collateralised and state enterprise loans, before applying
Assign the released funds in the budget by programme and project before signing
Creditor governments: legislate limits on holdout recoveries and require comparable treatment
Watch
Creditor committee formation and time to agreement in each case
Debt service as a share of revenue in participating states
Budget execution and audit reports after relief
Technology: Exposure
Public spending on digital systems, power and connectivity resumes in participating states under open procurement rules.
Actions
Prepare to bid under open tender and published contract rules
Structure offers to fit concessional investment programmes
Supply debt recording, budget and procurement systems that make the conditions verifiable
Watch
Capital budgets and project pipelines in participating states
Coverage of procurement portals and contract publication
Concessional lending commitments for infrastructure
Investors: Exposure
Bondholders and lenders take present-value losses on participating sovereigns. Ratings fall to selective default and then recover, and non-participants are repriced.
Actions
Value holdings of distressed sovereigns on the common terms
Assess each participant's budget and procurement record, since the recovery in ratings depends on it
Review exposure to borrowers that may apply later
Watch
Rating actions on participants and non-participants
Legislation on holdout creditors in New York and London
Frontier sovereign bond spreads and new issuance
Public: Exposure
Households gain where the release reaches clinics, schools and infrastructure. They gain little where it funds wages before elections or state enterprise losses.
Actions
Civil society: track budget allocations and contract awards against published commitments
Local government: prepare investment projects that meet the lending conditions
Media: report how the released funds are spent, not only the agreement
Watch
Health and education spending per head after relief
Published audit findings on the use of released funds
New public borrowing during the relief period

10Regional exposure

Region	Exposure	Rationale
North America	Low	Creditor region with little direct gain; New York law governs many of the bonds.
Europe	Low	Paris Club creditors and London-law bonds; losses are small relative to the financial system.
China	Medium	Largest official bilateral creditor; extends maturities, records losses and sets a precedent for future lending.
Indo-Pacific	Medium	Laos and several Pacific island states are candidates; Japan is a major official creditor.
South Asia	High	Pakistan, Sri Lanka and the Maldives are candidates; the release is large relative to revenue.
Gulf and Middle East	Medium	Egypt, Jordan and Lebanon as candidate debtors; Gulf states as creditors and depositors.
Africa	High	Most participating states; interest bills had exceeded health or education spending in many of them.
Latin America and Caribbean	High	Argentina, Bolivia, Ecuador and several Caribbean states are candidates; bond-heavy debt makes private participation decisive.
Russia and Eurasia	Medium	The Kyrgyz Republic and Tajikistan owe large sums to Chinese lenders; Russia is a bilateral creditor.

11Early-warning indicators

Indicator	Source	Threshold
External public debt service as a share of government revenue	World Bank International Debt Statistics; IMF World Economic Outlook	above 20 per cent in 25 or more states
Low-income countries at high risk of or in debt distress	IMF and World Bank debt sustainability analyses for low-income countries	half or more of rated countries
Time from application to agreement in restructuring cases	Paris Club; IMF programme documents	under 12 months in two consecutive cases
Creditor composition of external public debt	World Bank International Debt Statistics	—
Net transfers on external debt to low- and middle-income countries	World Bank International Debt Report	negative for two consecutive years
Frontier sovereign bond spreads	J.P. Morgan EMBI Global Diversified	ten or more sovereigns above 1,000 basis points
Agreed common terms among official and private creditors	Global Sovereign Debt Roundtable co-chairs' statements	a published term sheet endorsed by all three creditor groups
Budget transparency in candidate states	International Budget Partnership Open Budget Survey	—

12Compounds

Triggers: S18 Public service leap · Budget and procurement conditions, with restored capital spending, favour auditable public digital systems
S16 Water-efficient food leap · Fiscal room pays for extension services, seed finance and storage in low-yield regions
S15 Clean power threshold · Restored creditworthiness lowers the cost of capital for power projects in participating states
S19 Chronic disease advance · Recovered health budgets sustain the primary care that preventive treatment needs
S12 Market access opening · Restored fiscal room lets members fund infrastructure and absorb lost tariff revenue
S20 Outbreak defence succeeds · Released fiscal capacity funds health workers, laboratories and cold chain in distressed states.
Triggered by: S02 Global funding seizure · A cluster of sovereigns losing market access forces creditors to coordinate
S10 Severe pandemic · A pandemic prompted the 2020 suspension of debt service and could prompt a deeper treatment
S06 Breadbasket failure · Food import bills exhaust the foreign exchange of indebted importers
S13 Great-power détente · Cooperation between the largest official creditors makes a common restructuring framework workable
S14 Middle East settlement · Reconstruction finance brings the debts of conflict-affected states into restructuring talks
S16 Water-efficient food leap · Lower food import bills and subsidy costs reduce the financing needs of distressed importers and make restructuring terms easier to meet.
Amplified by: S13 Great-power détente · Cooperation between the United States and China makes common creditor terms easier to agree
S12 Market access opening · New market access raises the export earnings from which remaining debt is serviced
Amplifying trends: Sovereign creditor fragmentationSovereign debt & interest burdenConcessional finance scarcityFiscal rules & budget credibilityPublic procurement capabilityCorruption & state captureDevelopment finance as influenceSlow growth & fiscal space
Key trends: Sovereign debt & interest burdenCritical Sovereign creditor fragmentationCritical Concessional finance scarcityVery high
From GINC Trends: the trends rated Very high or Critical for this scenario, of 250. All S11 trend scores.

13Rating rationale

Rating	Band or level	Why
Likelihood, two years	2Unlikely	The G20 Common Framework has handled four cases since 2020 and each took years. The Global Sovereign Debt Roundtable has improved process but has not produced binding common terms, and official, Chinese and private creditors still negotiate separately. The 2025 Sevilla Commitment stated intentions without a mechanism. Concluding 25 agreements in 18 months would need a change in creditor coordination that is not in preparation.
Likelihood, ten years	3Possible	The Brady Plan came seven years after the 1982 debt crisis began, and the HIPC Initiative followed more than a decade of repeated reschedulings. Debt service burdens in low-income countries are at their highest in decades, and a cluster of defaults could force coordination. A reset on this scale within ten years is possible, but it requires agreement between China, Paris Club members and bondholders.
Systemic impact	3Significant	The direct sums are small against global output: the external debt service of 25 distressed states is well under 0.5 per cent of global output a year. Level 3 rests on the second criterion: capability band shifts across several domains in at least 25 nations, together with creditor losses and a repricing of frontier sovereign debt that reaches borrowers outside the framework.
National impact	4Major	For a participating state the change is large. Where interest payments exceed spending on health or education, a 40 per cent cut in debt service for five years releases several percentage points of revenue. HIPC recipients raised poverty-reducing spending as debt service fell. Level 4 is reached on essential services, in either direction: the release lasts where budgets and procurement are credible and is dissipated where they are not.
Confidence	medium	The precedents are well documented and the three panel members gave identical ratings. The creditor base is more divided than in 1996, and the use of released funds varies widely between states.

Source of scores: model-panel-v0.5. Confidence refers to the rating, not the scenario. Calibration sources are listed with the anchors above and on the scenario methodology page.

14Open questions

Contested assumptions for the panel to resolve.

Whether 25 agreements in 18 months is attainable when the four Common Framework cases each took years, and what change in creditor coordination the specification assumes without stating it.
How to treat states that stayed current through spending cuts and receive nothing, and whether their higher financing costs are large enough to count as a loss in the test.
Whether a uniform 40 per cent cut in debt service is the right measure, when the balance between maturity extension and principal relief decides what happens after the fifth year.
Whether middle-income distressed states belong in the same event as low-income ones, given that the test settings scale the gain by low income.

15Commentary

No signed commentary in this build.

16Version and citation

Version: 0.5.0 · active · debt-service-reset
Change log: 0.5.0 · 9 October 2026 · Rebuilt in the second pass from Coordinated sovereign debt reset: at least 25 states within 18 months in place of about 50, debt service cut by 40 per cent in place of half, systemic impact raised to level 3 and the test moved to budget credibility and procurement.
Full change log

Rating history

One row per edition. Each edition page is frozen at release; corrections are published as errata.

Edition	Rank	L2y	L10y	Systemic	National	Confidence	Edition view
2027	Not ranked	2Unlikely	3Possible	3Significant	4Major	medium	Open

Versions

Version	Date	Change
0.5.0	9 October 2026	Rebuilt in the second pass from Coordinated sovereign debt reset: at least 25 states within 18 months in place of about 50, debt service cut by 40 per cent in place of half, systemic impact raised to level 3 and the test moved to budget credibility and procurement.

Citation and downloads

Cite as

GINC (2027). Scenario S11 A creditor agreement releases fiscal capacity, Scenario Library v0.5. scenarios.ginc.org/scenarios/debt-service-reset

Content and data are published under CC BY 4.0.

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