Financing for development: Debt and debt sustainability, and interrelated systemic issues

Action taken by the Trade and Development Board 2018
Financing for development: Debt and debt sustainability, and interrelated systemic issues
Agreed Policy Recommendations
Closing plenary
9 Nov 2018

The Intergovernmental Group of Experts on Financing for Development,

Reaffirming General Assembly resolution 69/313 of 27 July 2015 on the Addis Ababa Action Agenda of the Third International Conference on Financing for Development, which is an integral part of the 2030 Agenda for Sustainable Development, supports and complements it, helps to contextualize its means of implementation targets with concrete policies and actions and reaffirms the strong political commitment to address the challenge of financing and creating an enabling environment at all levels for sustainable development in the spirit of global partnership and solidarity,

Recalling the Nairobi Maafikiano, in which member States committed to strengthen their support for the role of the United Nations Conference on Trade and Development (UNCTAD) in the implementation of the outcomes of the International Conference on Financing for Development and the 2030 Agenda for Sustainable Development, as the focal point within the United Nations system for the integrated treatment of trade and development and interrelated issues in the areas of finance, technology, investment and sustainable development,

Reaffirming the need to continue the important work of UNCTAD on financing for development, so as to enhance its ability to support developing countries,

Stressing the importance of fulfilling all Sustainable Development Goals, and all means of implementation, in particular Goal 17,

  1. Takes note of General Assembly resolution 69/319, entitled “Basic Principles on Sovereign Debt Restructuring Processes”, and recalls the UNCTAD Principles on Promoting Responsible Sovereign Lending and Borrowing;
  2. Recommends that UNCTAD continue its substantive work on the systemic impact of debt crises and challenges to debt sustainability on the implementation of the 2030 Agenda for Sustainable Development, with particular focus on its work on long-term debt sustainability, and intensify its work on early warning monitoring systems;
  3. Recognizes that previous financial and economic crises have had particularly adverse effects on poverty, and emphasizes that the strategies employed to address them have sometimes resulted in exacerbating income and wealth inequalities;
  4. Recognizes the role of special drawing rights as an international reserve asset, acknowledges that special drawing rights allocations helped to supplement international reserves in response to the world financial and economic crisis, thus contributing to the stability of the international financial system, including developing country and global economic resilience, and also recognizes the need to continue to review the role of special drawing rights, including with reference to their potential role in the international reserve system;
  5. Recognizes the need to reduce reliance, by default, on private credit rating agency assessments, including in regulations, and to promote increased competition as well as measures to avoid conflict of interest in the provision of credit ratings; recommends that the international financial and banking institutions continue to enhance the transparency of risk-rating mechanisms, noting that sovereign risk assessments should maximize the use of objective and transparent parameters, which can be facilitated by high quality data and analysis; and encourages UNCTAD to continue its work on the issue;
  6. Emphasizes that capital controls remain a useful tool in the hands of sovereign States, but that these need to be used in a nuanced and sensitive way that does not eliminate inflows, but carefully manages the impact and cost of capital reversals;
  7. Recommends that measures introduced to respond to evolving new debt crises seek to reduce, not exacerbate poverty, inequalities, asymmetries and other factors that contributed to the global financial crisis;
  8. Recommends that countries support multilateralism and avoid any sort of unilateralism that adversely affects debt sustainability of affected countries, and urges, in this regard, avoiding unilateral coercive measures, including illegal sanctions, that are an impediment to development, especially for developing countries, taking into account United Nations General Assembly resolutions, including resolution 58/198 of 23 December 2003 as well as the report to the General Assembly (A/60/226) of 12 August 2005 on the aforementioned matter;
  9. Notes with concern that the total external debt stocks of small island developing States have more than doubled between 2008 and 2017, that average debt-to-gross domestic product ratios in small island developing States have risen from 28.3 per cent in 2008 to 58.2 per cent in 2017, with some small island developing States facing debt-to-gross domestic product ratios well in excess of 100 per cent, and that the ratio of external debt-to-exports rose to a staggering 163.8 per cent in 2017;
  10. Acknowledges the efforts of, and invites creditors to provide additional flexibility to, developing countries affected by natural disasters so as to allow them to address their national debt concerns, while taking into account their specific economic and social situations and needs;
  11. Stresses that initiatives to tackle environmental and growing debt vulnerabilities in small island developing States need to consider persistent barriers to further structural transformation faced by many middle-income countries, including small island developing States, and broaden their focus from short-term to include long-term debt sustainability concerns;
  12. Welcomes the debt-for-climate adaptation swap initiative of the Economic Commission for Latin America and the Caribbean as an option which can assist in the mitigation of and adaption to the consequences of climate change, while reducing the debt burdens of Caribbean countries;
  13. Recognizes recent measures by the international community to ease the access of all developing countries to international public finance, such as capital increases for the World Bank, and recommends in addition a review of current eligibility and graduation criteria with a view to facilitating the access of middle-income small island developing States to concessional finance, for example through the inclusion of environmental vulnerability indicators in eligibility criteria;
  14. Requests UNCTAD to continue its current work on long-term debt sustainability analysis and enhance its assessment of Sustainable Development Goal-related investment requirements to include climate change mitigation and adaptation needs and the impact of natural disasters;
  15. Takes note, emphasizing that transparency and accountability are essential to supporting responsible sovereign lending and borrowing, of recent initiatives by the International Monetary Fund, the World Bank Group and the Group of 20 to stress the importance of effective debt data reporting, recording and monitoring at national levels, and invites donor countries to consider increasing their support for technical cooperation programmes aimed at increasing downstream debt management capacities;
  16. Encourages the United Nations system, including the World Bank Group, the International Monetary Fund and other relevant stakeholders, to continue to conduct analytical activities and to provide policy advice and technical assistance to Governments, upon request, in the areas of managing debt and operating and maintaining databases and, in this regard, recommends that UNCTAD should continue its analytical and policy work and technical assistance on debt issues, including the Debt Management and Financial Analysis System programme, so that this extends not only to improvements in the timeliness and accuracy of debt data recording, but to enhanced coverage of public sector and other relevant debt data, including in particular heretofore unrecorded or hidden debt instruments, contingent liabilities and more complex debt instruments;
  17. Reiterates its view that the fulfilment of all official development assistance commitments remains crucial, and that careful consideration should be given to the appropriate structure and use of blended finance instruments to ensure that projects involving blended finance, including public–private partnerships, should share risks and rewards fairly, include clear accountability mechanisms and meet social and environmental standards to include the costs of public–private partnerships in the analysis of debt;
  18. Stresses that the fulfilment of all official development assistance commitments remains crucial; official development assistance providers have reaffirmed their respective official development assistance commitments, including the commitment by many developed countries to achieve the target of 0.7 per cent of gross national income to official development assistance, and 0.15 to 0.20 per cent of gross national income to official development assistance for the least developed countries, and urges all others to step up efforts to increase their official development assistance and to make additional concrete efforts towards official development assistance targets;
  19. Recommends that debt relief, including debt cancellation, as appropriate, and debt restructuring as debt crisis prevention, management and resolution tools, should be facilitated on a case-by-case basis;
  20. Encourages Governments to be mindful of the ability of non-cooperative minority bondholders to block a restructuring of a debt-crisis country’s obligations, and encourages debtors and creditors to work together to draft bond agreements accordingly;
  21. Recognizes that, in accordance with outcome document TD/519/Add.2 of UNCTAD, General Assembly resolutions 72/203, 69/313 and 63/303 and Economic and Social Council resolution 2011/39, and within the scope of the International Conference on Financing for Development and of UNCTAD quadrennial conferences, the Intergovernmental Group of Experts on Financing for Development of UNCTAD produces technical advice and analysis, including recommendations on systemic issues relating to the goals and means of implementation of the 2030 Agenda for Sustainable Development to be made available to the high-level segment of the Economic and Social Council, through the Trade and Development Board;
  22. Recalls the decision in Economic and Social Council resolution 2011/39, and recommends that the General Assembly examine this matter during the 73rd session of the General Assembly, with a view to supporting the work of the President of the General Assembly and the Secretary-General, in accordance with General Assembly resolutions 71/215 and 72/203;
  23. Recalls the request by the General Assembly for the Intergovernmental Group of Experts to present the outcome of its work as a regular input to the forum on financing for development follow-up (General Assembly resolution 72/204, paragraph 27), and, in this regard, recommends that the outcome of the work of this Intergovernmental Group of Experts be presented, through the Trade and Development Board, as a regular input to the Economic and Social Council forum on financing for development follow-up.