Alternatives to negotiating sovereign debt

Published on (first on AFRODAD [1]), by Tirivangani Mutazu, 21 July 2010.

Although not all Heavily Indebted Poor countries (HIPC 1999) have benefited from the debt relief initiative and the subsequent Multilateral Debt Relief Initiative (MDRI 2005), these processes have left us with many enduring lessons. These lessons include the fundamental fact that such relief initiatives are not sustainable.

The following might explain why: firstly they were creditor led, with decisions about who can and cannot get debt relief being made by creditors on premises that are sometimes arbitrary. The debtor countries are on the back foot throughout the process. Secondly the initiatives were a result of pressure from civil society and were not structural and based on fair and just global financial architecture. Thirdly, they were based on a philanthropic attitude which would seem to condone a value system based on a brutal vein of capitalism. [2] It is our hope that today’s debt relief can be based more on a common value system based on a position of justice, equity and human rights.  

The debt crisis could be ascribed to the responsibility of both the creditors and debtors. In the absence of any institutional mechanism for securing such responsibility on the part of both parties, we can expect that the dominant party, in our experience the creditor, will assign failure and irresponsibility to the debtor and will impose the ideology that would support their position … //

… Global, regional and national proposals on the next steps:

There are proposals to bring the issue to the G20 as the ultimate decision making body for procedures and structures of the international financial architecture. FTAP need to be introduced to individual G20 member swho may wish to avail themselves of a fair and transparent process i.e. both creditors and debtors.  Will individual governments repudiate the “normal” Paris Club/HIPC/ circus, and demand a fair and transparent process for themselves? Erlassjahr suggests that CSOs need to introduce the option particularly to those countries that are at the most critical stage, i.e. the post-CP-HIPCs on the IMF’s high risk list. [4]

AFRODAD will look into the African HIPCs,  through  the regional groupings and the African Union (AU). Although this may take time, this will protect weaker debtor nations from creditors. If the creditors can gang up under the Paris Club (Creditor cartel), debtor nations should be able to form a debt cartel under the AU.

An additional answer to the question, will individual governments repudiate the “normal” Paris Club/HIPC/ circus, and demand a fair and transparent process for themselves?  is that, as we all know, African governments are generally afraid of the Arbitration issue, as this might have a negative impact on their relations with various donors. But the problem comes from a lack of collective or multilateral approach to the issues and that is why the Arbitration issue has to be started from above, the United Nations.

How do we deal with the overwhelming problem of powerlessness of African debtor governments? Firstly, there has to be a shift from dealing with issues at the individual level to that of more a collective approach through such institutions as the AU. Individual debtor countries must be shielded from the brutality of creditors and their vulnerability must be protected. International institutions are perhaps also able to play a role in spite of the predominance of the creditor countries in those institutions.

What is left is to build an international movement that is prepared to communicate and promote the FTA proposal to local and national grassroots, and to meet the challenges that will be encountered in the continued push for International debt arbitration. (full long text).

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