The global sovereign debt architecture is increasingly recognized as outdated, fragmented and ill-equipped to respond to the scale and urgency of today’s debt crises. With over 3.3 billion people living in countries where interest payments exceed public spending on health or education, calls for reform have grown louder across the multilateral system.
This paper, part of UNU-CPR’s Global Governance Innovation Platform (GGI) and released ahead of the Fourth International Conference on Financing for Development (FfD4), reviews the renewed momentum for a multilateral sovereign debt restructuring mechanism. It traces the evolution of this long-standing idea – first raised during the Great Depression and debated repeatedly over the past century – and assesses how current proposals aim to bring greater predictability, transparency and equity to sovereign debt workouts.
Recent developments, including the March 2025 draft of the FfD4 outcome document, signaled strong interest in launching a UN-based intergovernmental process to address debt sustainability, including through a potential multilateral mechanism. While references to such a mechanism were removed from the final Compromiso de Sevilla outcome document in June 2025, the agreed text leaves space for continued dialogue within the UN system.
The paper outlines a range of proposals from Member States, the IMF, civil society and UN bodies, highlighting key design trade-offs and institutional options. It also considers lessons from other multilateral mechanisms, such as climate finance, public health and trade, that could inform the creation of a more functional and inclusive sovereign debt restructuring framework.
As the sovereign debt burden continues to grow, exacerbated by pandemic-era borrowing, global inflation and climate shocks, experts and UN leaders alike warn that the current system is no longer fit for purpose. While reform will require political will and sustained negotiation, the paper argues that the groundwork is being laid for long-overdue systemic change.
Read the paper here.
