debt rescheduling

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A change in the terms of outstanding loans in which the debtor has repayment difficulties. The rescheduling can take the form of an entirely new loan or an extension of the existing loan repayment period, deferring interest or principal repayments. When debt rescheduling concerns less developed countries, the new agreement may involve a lowering of interest rates or an offer of an aid package of foreign investment to the country to offset some of the existing debt. In the late 1980s the major UK commercial banks wrote off or made provision for nearly £10 billion of debt to less developed countries — often Latin American countries who had simply stopped repaying their earlier loans. Subsequently a wide range of rescheduling schemes were adopted, including some in which the debt, or part of it, was converted into internal aid programmes.

Subjects: Financial Institutions and Services.

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