Eurodad believes that current practices in the way a country is deemed to have “sustainable” or “unsustainable” debts by the international financial community are flawed, both on a theoretical level as well as practical level. The approach adopted by the International Financial Institutions and the international creditor community is to simply assess whether, given certain analyses of economic growth, external trade dynamics and the availability of external financial resources, a debtor country is able to service its obligations. The Debt Sustainability Framework says very little about the consequences for human development that such payments entail.
Following the global financial crisis, the framework was ‘flexibilised’ in 2009 to allow countries to take-on more debt before being considered in ‘debt difficulties’. Eurodad is worried however that it gives donors a get-out clause from putting on the table significantly increased amounts of concessional finance.
Eurodad’s work in this area involves advocating for a concept of debt sustainability which takes into account the resources developing countries’ need to tackle poverty. Eurodad, its network members and colleagues in the South work to expose the limitations of the IFIs’ approach, both in general and in its application to particular countries. The UN has also supported this human development approach to debt sustainability.
Alternative approaches to debt sustainability include “Debt relief as if people mattered” by the New Economics Foundation (LINK) and “Debt sustainability analysis of Bolivia’s public external and internal debt” by Jubileo Bolivia and Latindadd (LINK).