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From Geneva: A Challenge to Illegitimate Debt, by Neil Watkins

Posted by jubileeusa on 18 November 2009 at 11:47 AM

Geneva
Last week, I had the opportunity to attend a meeting of the United Nations Conference on Trade and Development (UNCTAD) in Geneva about how the global economic crisis is affecting developing countries’ debt situations.

The conference brought together more than 350 participants from 100 governments, representatives of civil society like me as well as representatives from other official institutions including the IMF and World Bank.

One of the main themes of the conference was that the global economic crisis is hitting the poorest the hardest. As Musharraf Hossain Bhuiyan with the Ministry of Finance in Bangladesh pointed out, “This crisis was born in the advanced market economies but has major consequences in developing countries. Poor countries are the victims of developed countries’ mistakes.”

The crisis is also endangering some of the gains we have made as debt campaign. With markets for poor country exports down, governments have less income to pay for debts and to finance their government budgets.

As UNCTAD’s Secretary General Supachai Panitchpakdi pointed out: “Developing countries face a Hobson’s choice: Pursue debt sustainability or huge new borrowing. Both options are bad. Full debt cancellation and large increase in aid are needed instead.”

But the conference also addressed another key issue: how to address the problem of odious debt and the need for new lending and borrowing to be just and responsible. Countries need resources – and they need them fast – but these resources should be of high quality and not simply repetitive of past mistakes which have led to a large accumulation of illegitimate debts.

I was at this same conference two years ago, and the difference this year was that there was much more engagement and participation by developing country governments on this topic. Whereas in the past, developing countries seemed reluctant to speak up out of fear of displeasing rich country donors in attendance, this time that caution seemed gone. Perhaps the crisis has emboldened developing countries to speak their minds with less caution as funds dry up and donors turn inwards.

Government representatives from DRC to Rwanda to Nicaragua to Zimbabwe described much of their own debts as odious. As Senator Obert Gutu from the MDC party in Zimbabwe pointed out, “Without auditing the debt, we might end up paying a debt that entrenched a dictatorship. This is like people paying for getting punished. The overwhelming majority of Zimbabwe’s debt is odious in law, and thus should not be enforceable.”

With the gravity of the problem clear, the UNCTAD conference concluded on a hopeful note, with the launch of a new initiative to establish a set of guidelines for responsible lending and borrowing. The goal is to set in place commonly agreed practices of responsibility, thus avoiding the build up of new odious and/or illegitimate debts.

Following the main gathering, I represented Jubilee USA at the first meeting of the Experts Group which UNCTAD set up to draft the guidelines. Meanwhile, a dozen governments have expressed interest or support for the project and have joined a parallel Advisory Group, which will ultimately approve the proposed guidelines.

It was encouraging to know that after 10 years of Jubilee USA and other civil society groups raising issues of illegitimate debt and the need for more responsible lending, that these issues have finally found their place in the discussion on the international policy-making stage. Jubilee USA will be participating in and following closely the new initiative and efforts to create the new guidelines, and we’ll be keeping you posted!

Posted by jubileeusa on 18 November 2009 at 11:47 AM |

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