Debt moratorium

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. A moratory law is usually passed in some special period of 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 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 payment of debt to its creditors, in the event that 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 payments, or a partial cessation; for example, the government of President Alan García of Peru implemented the so-called "Ten Per Cent Solution", where 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, are Peru, Brazil, Mexico, Argentina and the US in the Great Depression with its WWI debts (1931).