Foreign Debt and Human Rights
In a side event during the 28th Session of the Human Rights Council organized by the Permanent Missions of Argentina and Cuba to the United Nations in Geneva, issues pertaining to the consequences of foreign debt on human rights were discussed. The session also addressed the challenges that States encounter in their debt restructuring processes, especially due to the negative impact of the activities and litigation by ‘vulture funds’.
By Kinda Mohamadieh
Issues pertaining to the consequences of foreign debt on human rights were discussed in a side event organized by the Permanent Missions of Argentina and Cuba to the United Nations in Geneva on Wednesday, 4th of March 2015, during the 28th Session of the Human Rights Council. The session aimed at providing a space to discuss national experiences, as well as strategies adopted in the regional and multilateral arena, in regard to debt restructuring. The session also addressed the challenges that States encounter in their debt restructuring processes, especially due to the negative impact of the activities and litigation by ‘vulture funds’. ‘Vulture funds’ refer to private entities that buy up sovereign debt at a discount and then pursue a litigation process to force the debtor to payout the full amount. Panelists included the Permanent Representative of Argentina to the United Nations in Geneva, the Deputy High Commissioner for Human Rights, the Permanent Representative of South Africa to the United Nations in Geneva, the Permanent Representative of Cuba to the United Nations in Geneva, the Permanent Representative of Greece to the United Nations in Geneva, the Executive Director of the South Centre, a member of the Advisory Committee of the Human Rights Council, the United Nations Independent Expert on the effects of foreign debt, and the Director of the Division on Globalization and Development Strategies at the United Nations Conference on Trade and Development (UNCTAD).
Ambassador Alberto Pedro D’Alotto, Permanent Representative of Argentina to the United Nations, commenced the session by underlining that the challenges emerging out of foreign debt and the negative impacts of the activities of ‘vulture funds’ on the enjoyment of human rights are faced by all countries, at various levels of economic development.
Ambassador D’Alotto noted that since the 1990s, the Commission on Human Rights and subsequently the Human Rights Council have, in a number of resolutions and decisions, adverted to the challenges that excessive foreign debt burden pose to the realization of human rights. He added that the negative impacts of the activities of ‘vulture funds’ and its consequences in regard to the enjoyment of human rights raise problems for the processes of sovereign debt restructuring.
Ambassador D’Alotto added that several studies show that the amount that some countries spend yearly in foreign debt service is higher than the budgets appointed to fulfill basic needs or public services, such as education and health. He cautioned that countries might be diverting a disproportionate percentage of their budget aimed at combating poverty and improving social conditions to foreign debt service.
Given the challenges that foreign debt pose to the fulfillment of human rights, and Argentina’s belief that the practices of ‘vulture funds’ pose a global problem that can affect any country going through a debt restructuring process, Argentina promoted a number of initiatives on this issue in different international fora, Ambassador D’Alotto explained. These are namely Resolution 68/304 at the UN General Assembly dealing with the establishment of a multilateral legal framework for sovereign debt restructuring, and Resolution 27/30 at the UN Human Rights Council on the negative impacts of the activities of ‘vulture funds’ on human rights. Both resolutions were adopted during September 2014. Ambassador D’Alotto added that the broad support to these initiatives reflected the will of the international community to address the existing gaps in multilateral rules and mechanisms; these gaps have been undermining sovereignty of States and affecting their capacity to guarantee the fulfillment of human rights.
Ms. Flavia Pansieri, Deputy High Commissioner for Human Rights, stressed that human rights have primacy. Economic growth and development objectives do not operate in a vacuum but are closely interconnected with human rights, she added. Besides the allocation of resources to development, it is important to consider the way in which this allocation is done, whether it is inclusive and rights-based, and whether it takes into account the state’s human rights commitments, including the UN Declaration on the Right to Development, she added.
The Deputy High Commissioner cautioned that States, when acting through their membership under international financial institutions, do not seem to be factoring their human rights commitments into decisions that deal with economic and financial measures, nor in mobilizing financial resources to ensure an enabling environment for development. Ms. Pansieri stressed the importance of being mindful of these considerations in the context of the Post-2015 development agenda and the Financing for Development (FfD) conference.
Ms. Pansieri underlined that the mandate of the United Nations Independent Expert on the effects of foreign debt has contributed to a deeper understanding of issues pertaining to the impact of foreign debt on human rights.
Debt per se is not a bad thing, Ms. Pansieri noted; external debt could help states weather economic shock or fulfill human rights obligations. It is the reason behind states’ indebtness that matters, according to Ms. Pansieri. Furthermore, it is important to recognize that states are sometimes shouldering unsustainable debt, which could threaten states’ ability to fulfill development objectives and human rights, she added.
Ms. Panisieri noted the challenges faced by the Heavily Indebted Poor Countries (HIPCs) to progress on achieving the Millennium Development Goals (MDGs). She added that states are still caught in the aftermath of the 2008 global crisis; both developed and developing countries face the challenges of sovereign debt crisis. Efforts to avert sovereign debt crisis has to be intentional, Ms. Pansieri stressed.
Ms. Panisieri pointed to the 2014 World Social Protection Report by the International Labour Organization (ILO) that shows austerity measures had expanded as a response to the global crisis. She warned that the larger pattern of austerity measures threatens the enjoyment of human rights and economic growth and development. Austerity measures impacted 123 million people in the Euro Zone alone, Ms. Pansieri added. She also cautioned that where states recovered, inequality has continued to rise. For example, 95% of the gains from economic recovery in the United States went to the top 1%, according to Pansieri.
The imposition of austerity measures has an impact not only on long term economic growth and development prospects, but also on inequalities, thus potentially translating into violations of human rights, the Deputy High Commissioner pointed out. She added that the International Monetary Fund (IMF) had addressed the correlation of higher inequality and lower growth rates, in recognition that inequality is not good for growth. Thus, measures that lead to increasing inequality have to be addressed, according to Pansieri.
Choosing austerity instead of investing in development impacts the longer-term sustainability of the overall economy, Ms. Pansieri stressed. Clearly, austerity measures are not the answer and should not be the answer, she added. Ms. Pansieri called on states to look for alternatives in order to balance the budgets without impacting the enjoyment of rights.
Ms. Pansieri pointed to the case of Iceland, which managed to weather the crisis by protecting its core welfare system and the collective participation of citizens in guaranteeing rights.
Ms. Pansieri underlined the importance of a fair, transparent and effective sovereign debt workout mechanism. She also called on the private sector to remain mindful of its responsibilities.
Ambassador Abdul Samad Minty, Permanent Representative of South Africa to the United Nations, commenced his statement by recalling the 2014 Report of the United Nations Secretary General on External Debt and Sustainability, which shows that the total external debt stocks of developing countries and transition economies reached $6 trillion in 2013, reflecting an increase of 8.7% compared to 2012.
The human rights implication of such foreign debt has long been debated within the Human Rights Council and the Commission on Human Rights beforehand. The imperative to address the effects of foreign debt on human rights arises from the principle of international assistance and cooperation, as provided for in the Charter of the United Nations, Ambassador Minty noted. Article 28 of the Universal Declaration of Human Rights also provides that “everyone is entitled to a social and international order in which the rights and freedoms set forth in this Declaration can be fully realized”.
An international order characterized by extreme indebtedness of low and middle income countries and an attendant inability to fulfill their human rights’ obligations towards their citizenry is inconsistent with this entitlement, Ambassador Minty stressed. MDG 8 also places additional responsibility on the international community to assist. The MDGs encompass a specific commitment towards an “enhanced programme of debt relief for heavily indebted poor countries and cancellation of official bilateral debt, and more generous official development assistance for countries committed to poverty reduction”, according to Ambassador Minty. There were some initiatives taken in this context including on the HIPCs, but implementation is proceeding too slowly, he added.
South Africa has done a comprehensive analysis of its Bilateral Investment Treaties (BITs), Ambassador Minty explained. South Africa’s experience highlighted evidence that BITs have very little, if any, impact on inward flows of foreign direct investment (FDI), yet they do pose a range of risks to democratic policy making. In a context where South Africa is constitutionally bound to pursue transformation in order to address the legacies of apartheid, these risks are simply not acceptable, Ambassador Minty stressed. Poorly drafted treaties can result in expansive interpretations of their provisions in ways that allow investors to challenge a wide – and widening – array of government measures deemed to have a detrimental impact on the investors’ ‘expectation’ of profit, he added. The Ambassador cautioned that this severely constrains governments’ capacity to legislate and regulate in the public interest.
Ambassador Minty added that these challenges are compounded by flaws in the international arbitration system established to enforce the treaties. There is growing concern over the investor-state arbitration system including its fragmentation, lack of transparency, and inconsistency in decisions, he noted. Also, arbitrators in most cases are drawn from a relatively small group of private practice lawyers, resulting in situations where the same individuals could serve as arbitrators in some cases and as counsel in others. The perception of conflict of interest in itself raises profound questions about the credibility and legitimacy of international investment arbitration, Ambassador Minty cautioned.
Ambassador Minty explained that investors and law firms representing them stand to gain enormously; litigation became part of the business model for investors and legal firms. In some cases, specialized firms finance claims against States in exchange for a share in a possible future award or settlement in favour of the claimant.
According to Ambassador Minty, a billion dollar industry has emerged out of this flawed system, and it is here where investment treaties spill over into discussions about ‘vulture funds’ and questions on sovereign debt restructuring.
These private interests have now ‘discovered’ that BITs offer another avenue to challenge governments that are seeking to re-negotiate the terms of repayment of the sovereign debt to bondholders/creditors. Ambassador Minty gave the example of Argentina, where some bondholders who bought Argentinian debt at discounted prices are now using BITs and the investor-state dispute settlement system to sue Argentina, which in effect would undermine Argentina’s efforts to re-negotiate and restructure its debt. Consequently, state sovereignty on matters of vital national interest is being severely compromised by private investors using a flawed international regime, Ambassador Minty cautioned.
According to Ambassador Minty, this context makes it clear that there is a need to establish a multilateral framework for orderly sovereign debt work-out that is not susceptible to profit-driven motives. The resolution of sovereign debt crisis cannot continue to be governed by ad hoc mechanisms; a comprehensive approach is needed. The current context also underscores an additional argument against BITs that offer another avenue for individual bondholders to arbitrate against States, thereby obstructing efficient debt restructuring, Ambassador Minty added.
There are several cases by vulture funds pending in South Africa. Debt constitutes a critical obstacle in the development of developing countries and especially in Africa’s fight against poverty.
Debt service competes with development spending. Financial considerations should not be the only consideration in dealing with debt distress, Ambassador Minty noted. An approach that takes into account the right to development is needed. He stressed that a government’s obligations to fulfill its human rights obligations towards its people must remain fundamental. He added that these funds should not supersede a State’s right to protect its people under international law. Moreover, the international community cannot be held captive by a few countries that are not ready for a statutory system of sovereign debt resolution, Ambassador Minty stressed.
Ambassador Anayansi Rodriguez Camejo, Permanent Representative of Cuba to the United Nations, commenced her input by cautioning that the economic and financial crisis affecting the world has had great impact on every country, particularly on the developing ones. These challenges are multiplied with the burdens of the foreign debt service payment. Consequently, the enjoyment of economic, social and cultural rights is unquestionably affected, the Ambassador added.
Ambassador Camejo pointed to the resolution that Cuba presents annually to the Human Rights Council entitled ‘Effects of foreign debt and other related international financial obligations of States on the full enjoyment of all human rights, particularly economic, social and cultural rights’. This resolution aims at drawing attention to this problem and making progress on ways to alleviate these burdens, taking into account the negative impact of the burden of foreign debt on the fulfilment of human rights, mainly in developing countries, Ambassador Camejo explained.
However, there are still some developed countries that fail to acknowledge the clear implications of the foreign debt on the enjoyment of human rights, Ambassador Camejo pointed out. This is the situation despite the clear examples listed by the Independent Expert on the effects of foreign debt in his reports and of the various statements made by UNCTAD and other international players on this matter.
According to Ambassador Camejo, in Cuba’s opinion, the different human rights standards and international fora where this issue is analyzed have not been able so far to find an equitable and permanent solution to the problem of debt in line with the various commitments adopted by the international community in this regard.
One of the topics that emerged from the studies undertaken under the mandate of the Independent Expert on the effects of foreign debt tackled the negative effect of the so-called ‘vulture funds’ on relieving the debt burdens and on the capacity of developing countries to meet their obligations and commitments in terms of development and human rights. Ambassador Camejo noted that the example of the attacks by vulture funds on Argentina has made clear their predatory nature; such practice reflects the problems of the current global financial system and its profoundly unjust nature, she added.
Ambassador Camejo underlined Cuba’s agreement that there is need for national and international actions to curb the activities of such funds, which must also be part of the necessary and thorough reform of the international financial system.
Ambassador Alexandros Alexandris, Permanent Representative of Greece to the United Nations, presented a message from the Alternate Foreign Minister responsible for International Economic Relations. The management of Greece’s foreign debt problem in 2010, when Greece agreed to an economic adjustment program, proved to be ineffective from the financial point of view and painful in regard to the impact on the Greek society, Mr. Alexandris noted. During a period of four years, the Greek economy receded by 25%, and youth unemployment increased up to 50% resulting in mass migration of young Greeks, Mr. Alexandris added.
The management of the Greek crisis had negative consequences on society, adversely affecting human rights conditions, in particular economic and social rights. Many households do not have access to electricity, medical care, and water. As a result, 30% of the population is confronted with the dangers of poverty and social exclusion, Ambassador Alexandris cautioned.
The new government seeks to address this situation while cognizant of the international climate that it operates within, Ambassador Alexandris explained. The power imbalance between financial markets and national economies persists, whereby financial investments are usually short term aiming at accruing high profits while ignoring the needs of the real economy. This is why Greece supported the introduction of tax on foreign exchange transactions, the Ambassador added.
Greece stands fully aware that states are confronted with a wide range of supranational problems that are in need of supranational solutions, Ambassador Alexandris pointed out. Greece is ready to launch initiatives towards resolution of problems that both national states and the international community are collectively facing, he noted.
Mr. Martin Khor, Executive Director of the South Centre, pointed to the position taken by the South Summit of the G77 held in Santa Cruz, Bolivia, where the of heads of states and heads of governments tackled in their declaration the role of vulture funds. Heads of states reiterated the importance of not allowing these entities to paralyze the debt restructuring efforts of developing countries and stressed that they should not supersede the rights of the state to protect its people under international law.
Mr. Khor added that not only the developing country leaders proclaimed against ‘vulture funds’. He mentioned the position taken by Mr. Gordon Brown, former Prime Minister of the United Kingdom, who condemned before the General Assembly of the United Nations in 2002 the perversity of practices by ‘vulture funds’ whereby they purchase debt at a reduced price and make a profit from suing the debtor country to recover the full amount owed. This is a morally outrageous outcome, according to Mr. Brown.
In addition, Mr. Khor pointed to the opinion of Martin Wolf in the Financial Times who noted that it is unfair to the birds called ‘vultures’ to name these entities by the term “vulture funds”; while the birds ‘vultures’ perform a valuable task, the hold outs do not recycle carrion but insist the carcass can meet its obligations.
When a country has to defend a legal case it has to divert a lot of resources away from social sectors, such as health care and education, Mr. Khor explained. This case is prevalent and does not represent an Argentinian problem only, he added. According to the World Bank and the IMF, 54 court cases were instituted against 12 heavily indebted poor countries (HIPCs) between 1998 and 2008. Moreover, the African Development Bank documents that at least twenty HIPCs have been threatened with or have been subjected to legal actions by commercial creditors and vulture funds since 1999, including Sierra Leone, Cote d’Ivoire, Burkina Faso, as well as Angola, Cameroon, Congo, Democratic Republic of the Congo, Ethiopia, Liberia, Madagascar, Mozambique, Niger, Sao Tome and Principe, Tanzania, and Uganda. Other countries that faced such cases include Peru, Nicaragua, among others.
Mr. Khor pointed to a case brought against Zambia, where a ‘vulture fund’, having bought a debt for USD3 million, sued Zambia for USD55 million and was awarded USD15.5 million. In the case of Peru, NML Capital, the same vulture fund that recently raised the case against Argentina in the United States’ courts, won a case against Peru in the year 2000, recovering many times what the fund paid for the country’s distressed debt. According to media reports, the fund spent almost four years in the courts to win a ruling that forced Peru to settle for almost USD56 million on distressed debts, which the fund had initially bought for USD11.8 million.
Mr. Khor cited a paper published by the United States Institute for Peace in 2013, which noted that “there are an estimated twenty-two vulture funds waiting for payouts amounting to $1.3 billion, thereby draining crucial resources and undermining prospects for economic development”.
According to Mr. Khor, addressing the negative implications emerging out of the role of ‘vulture funds’ should be a concern for all countries. He suggested that countries could take national action by adopting laws and regulations to prevent ‘vulture funds’ from pursuing excessive claims against heavily indebted countries before their national courts. He also suggested interventions through international cooperation and solidarity, including through developing an international mechanism that sets a standstill on debt payment and stay on litigation to allow breathing space for debtors and creditors in order to reach an agreement.
Mr. Khor pointed to the discussions taking place at the United Nations in New York on a sovereign debt restructuring mechanism. A mechanism that leads to fair and balanced solutions is what the world needs, especially at a time when the world faces global financial uncertainty and many countries are on a verge of a debt challenge.
He added that the Human Rights Council (HRC), including the Advisory Committee of the HRC, could contribute to the solutions.
Mr. Jean Zeigler, member of the Advisory Committee of the Human Rights Council, explained that the Advisory Committee of the HRC is mandated to prepare a research-based report on the activities of ‘vulture funds’ and the impact on human rights, specifically economic, social, and cultural rights.
Mr. Zeigler explained that debt issues are addressed under national laws on bankruptcy. Internationally, there is no law that addresses cases where states are over indebted, and no normative apparatus that can be drawn upon. What exist are mechanisms under the international financial institutions and forums dealing with reduction of debts.
Mr. Zeigler pointed to the implications of holdouts from debt restructuring processes, whereby few among the creditors hold out from joining the restructuring scheme proposed by the indebted country, and they ask for 100% of the original value of their bond. In the case of Argentina, hold-outs represented 1.7% of the total creditors. In some cases, holdouts sell their shares to vulture funds, he added.
Resolution 27/30 of the UN Human Rights Council (HRC) was not a consensus resolution, Mr. Zeigler noted. The financial community is witnessing a heated debate in regard to the possibility of the HRC developing normative control over ‘vulture funds’, Mr. Zeigler added. He pointed to a statement by the head of the bankers association of Switzerland, who in a recent interview questioned the process under the HRC, noting that ‘vulture funds’ do not accept normative control over their activities.
Mr. Zeigler stressed that it is necessary for the United Nations to become active in developing the normative framework addressing ‘vulture funds’, given the social and economic implications of their activities.
Mr. Zeigler explained that vulture funds do not refer to any specific juridical form; hedge funds have juridical definition but not ‘vulture funds’. There are only descriptions of the practice of vulture funds. The official term usually used to describe vulture funds is ‘distressed-asset funds’, he added. Vulture funds are generally offshore entities that lack transparency, which makes it difficult to identify who stands behind them. These funds are progressing very rapidly, Mr. Zeigler explained, making them a brutal instrument of modern capitalism, he noted. They are increasingly using litigation against states.
Since 2008, ‘vulture funds’ have won around three quarters of the cases they have raised. At the stage of executing the judgement, ‘vulture funds’ are aggressive in execution. For example, in a case raised by a ‘vulture fund’ against the Republic of Congo, the fund got a judgement for USD 90 million. For execution purposes, the ‘vulture fund’ seized oil shipments of the Republic of Congo worth USD 39 million.
Mr. Zeigler explained that the mandate from the Advisory Committee is clear. The starting assumption of the research mandated to the Advisory Committee is that the activities of ‘vulture funds’ violate the right to development and the economic, social, and cultural rights of the population in States attacked by these funds, he added, thus undermining the benefit that debt reduction brings to indebted countries. These are the hypotheses for the research that will be undertaken by the Committee, which will be examined through the case studies that the Advisory Committee will address, Mr. Zeigler noted.
Mr. Zeigler gave the example of a case brought against Zambia concerning debt that it originally owed to Romania as a result of a transaction concerning imported seeds and fertilizers. The original debt by Zambia amounted to USD 3.5 million. In 2007, a High Court in the United Kingdom accepted and recognized a claim by a ‘vulture funds’ ordering Zambia to pay USD 20 million. Mr. Zeigler noted the capacity and resources available to ‘vulture funds’ to pursue such claims for years with the support of highly paid lawyers.
In pursuing the research, Mr. Zeigler pointed that the ‘bona fide’ concept could be a central point in the approach that would be adopted. He added that under Swiss civil law, the ‘bona fide’ article provides that the manifest abuse of a right is not protected by the law, according to which a court would refuse abusive cases. Mr. Zeigler added that English law, and a law being prepared in Belgium, integrate the ‘bona fide’ article. In this regard, Mr. Zeigler noted that vulture funds would still be able to go to the courts; but asking for 100% of the original value of the debt they hold would be considered abuse of their rights. Accordingly, the courts could only accept a claim for the amount that the vulture funds paid to purchase the bond.
In addition, Mr. Zeigler noted that ‘forum hopping’ should be addressed. Vulture funds usually seek jurisdiction where the judicial forum would be most favorable for them. He also noted the possibility for debtor countries to label the debt in a currency other than the dollar. The American courts are not expected to change towards adopting the ‘bona fide’ approach, Mr. Zeigler added.
Mr. Juan Pablo Bohoslavsky, the United Nations Independent Expert on the effects of foreign debt and other related international financial obligations of States on the full enjoyment of all human rights, particularly economic, social, and cultural rights, stressed that the threats from a global debt crisis are not over; debt vulnerabilities remain high and growing. Moreover, debt relief initiatives appear not to achieve their aim, he added.
Heavily Indebted Poor Countries are likely to miss the Millennium Development Goals (MDGs) targets, Mr. Bohoslavsky noted. The debt crisis in Greece reminds us that it is not only least developed countries that are at risk, he added. Access to housing, electricity, health services, and other basic services have been a concern in many European countries, he explained.
Mr. Bohoslavsky asked whether European and international financial institutions are bound by the human rights obligations that their Member states have signed at regional and international levels. While European financial institutions may acknowledge such obligations, he noted, he questioned whether they have actually operated based on them.
States can try to minimize the impact, but can also do more harm when resources are distributed in an unequitable manner, thus hitting the most vulnerable in society, Mr. Bohoslavsky explained. He recalled his visit to Iceland in December 2014. Iceland was hit by a banking crisis in 2008, which was a severe blow to the country, causing unprecedented unemployment. During his visit, Mr. Bohoslavsky witnessed that while certain cuts were taken in health and education, the government increased social protection spending and social benefits directed to low-income households. As a result, inequalities were reduced in Iceland. Mr. Bohoslavsky noted that the government in Iceland had taken the choice to protect the core social welfare system; it imposed capital controls and endeavored to establish political, economic and judicial accountability.
Mr. Bohoslavsky moved to address the litigation of NML Capital against Argentina, which has underlined the need to find better legal solutions for debt restructuring. He added that the ruling by the U.S. Supreme Court in this case provides additional incentives to holdouts in debt restructuring processes and removes incentives to participate in debt restructuring. This makes the future restructuring processes harder, especially cases where contracts have weak ‘Collective Action clauses’.
The Independent Expert noted that litigation by ‘vulture funds’ in one country may hold extraterritorial implications and impede another country to pay its debts or fulfill its obligations in the area of economic, social and cultural rights.
‘Vulture fund’ litigation is a growing global trend, the Independent Expert noted. Between 1976 and 2010, there were about 120 lawsuits by commercial creditors against 26 debtor countries. In the 1980s, only 5% of debt restructuring was accompanied by litigation; this figure has gone up to almost 50 per cent and the total volume of principal under litigation reached USD 3 billion by 2010, Mr. Bohoslavsky cautioned.
Mr. Bohoslavsky recalled the importance of Resolution 68/304 dealing with the establishment of a multilateral legal framework for sovereign debt restructuring that passed at the UN General Assembly in New York, in addition to the United Nations Guiding Principles on Business and Human Rights and the Principles on Responsible Sovereign Lending and Borrowing. In the discussions towards designing a debt restructuring mechanism, Mr. Bohoslavsky noted that human rights principles, human rights impact assessments, and coherence between financial and human rights law are important elements. Moreover, civil society organizations and national human rights institutions should play a role in this process, according to Mr. Bohoslavsky.
Mr. Richard Kozul-Wright, Director of the Division on Globalization and Development Strategies at UNCTAD, pointed that UNCTAD serves as the focal point for international debt issues under the UN system and serves as the secretariat for negotiations towards a sovereign debt restructuring mechanism.
Mr. Kozul-Wright explained that those negotiations are contentious. Creditor countries are boycotting the negotiations, along with major international financial institutions, he added, on grounds that the UN is not the appropriate venue to discuss these issues. They argue that the IMF is the right place for a discussion on debt restructuring, he explained.
Mr. Kozul-Wright noted that such claims stand odd on a number of grounds; for example the track record of the IMF in regard to debt crisis is hardly strong, he added. He mentioned the cases of Greece and Iceland as reference cases in this regard. Mr. Kozul-Wright pointed to the IMF report on Iceland under Article IV Consultation released during the summer of 2008, which reflects the IMF’s assessment of the economy at the time. Reading the report, one would have no idea that the country will face a financial meltdown within three months, Mr. Kozul-Wright added. He noted that the argument that the IMF should be the sole arbiter on this issue is questionable.
According to Mr. Kozul-Wright, the UN system has been involved in international debt issues for a long time. Since the time of UNCTAD’s establishment, debt has been an issue on its agenda. The UN is the universal body that sets the ethical and normative principles for operations of international governance, including on economic issues.
Kinda Mohamadieh is a Researcher for the South Centre.
