UN officials, economic experts and representatives of international
financial institutions on Tuesday in New York held a meeting to discuss practical and equitable mechanisms on debt distress, which they said is affecting progress on development programmes and the world economy.
A UN statement issued on Wednesday said that the special meeting was tagged: “External debt sustainability and development: Lessons learned from debt crises and ongoing work on sovereign debt restructuring and debt resolution mechanisms”.
It quoted Mr. Nestor Osorio, President of UN Economic and Social Council (ECOSOC), as saying that, “the difference between today’s crisis and other recent crises is that, today, problems related to sovereign debt are not confined to emerging markets or low income countries”.
Mr. Osorio, however, stated: “To achieve sustainable development, the international community needs to promote responsible borrowing and lending, along with improved debt management”.
He noted that, “today’s debate on sovereign debt restructuring has important implications for the financing of sustainable development and the development agenda following the 2015 deadline of the Millennium Development Goals (MDGs) that aim to slash extreme poverty and accompanying ills”.
He disclosed that the total external debt of developing countries and countries with economies in transition surpassed US$ 4 trillion by the end of 2010.
According to him: “Countries in debt distress are generally unable to attract necessary financing for sustainable development”, adding that, “countries with debt overhangs often spend a large proportion of public resources on debt servicing, and are unable to allocate public revenue to expenditures necessary for sustainable development”.
The statement also quoted the Assistant Secretary-General of the UN Department of Economic and Social Affairs, Ms. Shashad Akhtar, as highlighting the importance of closing the gaps in debt management through restructuring, early response and coordination.
“There is a need for a process through which there is early engagement of debtors and creditors to frankly address unsustainable situations on a timely basis, which would reduce overall uncertainty in affected economies, as well as for a framework for creditor consultation and structures for engagement with debtors,” Ms. Akhtar said.
She added that unlike in the 1980s when the main creditors were large commercial banks, today’s bonds are held by a variety of entities and individuals. As a result, one of the issues that needs to be addressed is collective action involving creditors.
Meanwhile, the Secretary-General of the UN Conference on Trade and Development
(UNCTAD), Mr. Supachai Panitchpakdi, cautioned that, “not all origins of the debt crises are financial and as a result cannot be solved solely with financial means”.
“If you go overboard with austerity measures, that might reduce growth without reducing debt,” Mr. Panitchpakdi said.
He also noted that piecemeal solutions had been put forward in hopes that banking systems would resume lending without cleaning up their balance sheets, while countries had waited too long for restructuring efforts to be executed, creating economic uncertainties and hindered growth.
The statement said that the meeting included a series of presentations from senior officials of the World Bank and International Monetary Fund (IMF), as well as a range of roundtable discussions on various economic-related issues.
The meetings are part of a larger effort to strengthen relations between the UN and
international financial institutions such as the World Bank and the IMF.
Last week, UN Secretary-General Ban Ki-moon co-hosted a series of events on themes linked to the Millennium Development Goals (MDGs) with World Bank President Jim Yong Kim on the sidelines of the just-concluded 2013 spring World Bank-IMF meeting in Washington DC, US.