The first steps in launching a set of international standards for borrowing and lending among countries were taken Sunday evening at a panel debate at the UNCTAD XIII quadrennial conference under way here. The panel discussion on “debt crisis prevention and management” marked the beginning of official endorsement of the UNCTAD Principles on Promoting Responsible Sovereign Lending and Borrowing.
The principles aim to reduce the frequency and severity of debt crises by developing a set of voluntary guidelines that promote and reinforce responsible sovereign lending and borrowing practices. Lack of globally agreed rules and regulations guiding sovereign financing have contributed to many instances of irresponsible sovereign borrowing and lending to sovereign countries. The principles are meant to fill this gap.
UNCTAD Deputy Secretary-General Petko Draganov, addressing the gathering, said the Principles are entering a new phase. Intergovernmental consensus on the standards, he said, would represent an important step towards preventing debt crises. He welcomed the start of the new phase of endorsement and implementation of the Principles.
Senior government officials participating in the meeting expressed their support of the Principles, saying that more responsible financing would contribute to more financial stability and improved economic growth. Representatives of Brazil, Germany, Italy, Nepal, Norway, and Morocco expressed supported for the Principles on behalf of their countries.
The draft principles were introduced in May 2011 after a year-long transparent and inclusive discussion by an Expert Group. Also involved, as observers, were multilateral financial institutions and the “Paris Club,” an informal group of financial officials from 19 of the world’s largest economies. The UNCTAD secretariat, together with regional and national partners, have since held a series of bilateral and regional consultations with experts and governments from more than 60 countries. That resulted in several refinements to the draft.
Prof. Léonce Ndikunama of University of Massachusetts at Amherst (United States) gave a keynote speech on challenges and proposals related to the prevention and management of sovereign debt crises. He emphasized that there is a notable “global legal gap” in the area of sovereign financing.
Countries announcing their support of the voluntary Principles were represented by Otavio Ladeira de Medeiros, Head of Public Debt Strategic Planning Department of the National Treasury of the Ministry of Finance of Brazil; Hans-Joachim Henckel, Deputy Director General of the Federal Ministry of Economics and Technology of Germany; Nicola Faganello, First Counsellor of the Permanent Mission of Italy to the International Organizations at Geneva; Krishna Hari Baskota, Permanent Secretary of the Ministry of Finance of Nepal; Astrid Helle Ajamay, Deputy Director General and Head of UN Section of the Ministry of Foreign Affairs of Norway; and Mohamed El Makroume, Chief of the External Debt Management Division of the Ministry of Economy and Finances of Morocco.
The issue of implementing the Principles was discussed at the meeting. Prof. Anna Gelpern, of the American University Washington College of Law, discussed the “soft law” and voluntary status of the Principles and reviewed a wide spectrum of institutional, political, and contractual options to foster implementation of the standards.
Sami Suwailem, Senior Economist of the Islamic Development Bank, highlighted the similarities between the Islamic Finance Principles and the Principles discussed at the meeting.
Eric Lecompte, Executive Director of the Jubilee USA Network, moderated the panel said civil society supports the Principles and considers UNCTAD the appropriate place for discussing issues related to debt.