Government Debt in Rough Waters: Lazard Navigation Guide

The COVID-19 pandemic is triggering sovereign debt distress across the globe. Public debt was already elevated in many countries before the crisis hit, and the pandemic has created a
surge of debt without precedent, even during wartime. How governments learn to live with such debt levels or find orderly — or less orderly — ways to reduce them will have a critical
impact on people’s lives across the world.
Lazard’s Sovereign Advisory Group, part of its Financial Advisory business, has been advising governments on complex financial matters for a century. This note draws from the Group’s
experiences in highlighting several key observations on rising debt levels, including specific recommendations on how to improve outcomes for governments:
— The wide variation in public debt levels across countries and differences in their capacity
for bearing this debt: countries are unequal before debt;
— The complex policy trade-offs faced by governments at risk of financial distress;
— How an evolving creditor universe is changing the dynamics of debt restructuring; and
— How the process of debt restructuring could be made to function more smoothly.

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