Why a United Nations sovereign debt restructuring framework is key to implementing the post-2015 sustainable development agenda
In September, the United Nations will agree on the sustainable development goals (SDGs), a new set of targets that will shape the international development agenda for the next 15 years. The restructuring of sovereign debt has been identified by the United Nations Open Working Group (OWG) as something the world must get right if it is to successfully implement these goals. Yet crippling national debt crises persist, and no system exists to restructure these debts in a speedy and effective manner.
A new opportunity to tackle this situation emerged in September last year, when the UN General Assembly voted in favour of a new debt restructuring mechanism. An ad hoc committee was set up and began meeting in February 2015.
Success now depends on the constructive engagement of all nations and the subsequent implementation of a new way to restructure debt that takes development needs into account. Yet several powerful nations are so far refusing to take part in this crucial process.
looks at how vulnerable many developed and developing countries remain to debt crises. It explores the impact of these crises and of long-term unsustainable debt; and it examines the deficiencies of existing mechanisms to deal with debt, while recommending a way forward.
This report finds that:
• Developed and developing countries are facing an increasing risk of sovereign debt crises. Public debt levels in several developed countries are historically high and austerity policies have not improved the situation. Meanwhile, developing countries are borrowing from increasingly risky and more expensive sources.
• Acute debt crises and the economic recessions they have caused have devastating effects on the implementation of development goals, and can even undo past progress.
• There are currently no institutions to manage debt crises effectively. Existing forums are fragmented, which makes negotiations difficult. Many, such as the International Monetary Fund (IMF), are dominated by creditors so cannot make impartial decisions and lack legitimacy.
• Current negotiations about a UN-led multilateral framework to restructure these debts offers a unique opportunity. It would be inclusive and could mitigate the negative social and economic consequences of debt crises.
Eurodad recommends that the international community seizes the opportunity created by the current negotiations at the UN to develop an international debt restructuring mechanism along criteria presented in this report. The UN General Assembly should adopt those criteria and organise negotiations at the UN to set up the multilateral mechanism.
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