Norway has completed a review of its loans to developing countries based on UNCTAD's Principles of Responsible Sovereign Lending and Borrowing (the Principles) demonstrating the increasing importance of the Principles in setting international standards.
This is the first undertaking to implement the Principles at the national level. The Principles are an attempt to reduce the frequency and costs of debt crises which have repeatedly afflicted numerous developing and developed countries.
The international principles are the result of three years of UNCTAD-led consultation and drafting, including extensive work by an expert group to compose a text. The group included academics, professionals from the private sector, representatives of non-governmental organizations, and observers from the International Monetary Fund, the World Bank, and the Paris Club (an informal group of official creditors from 19 of the world's largest economies). More than 70 countries also actively participated in the drafting process. The Principles were officially launched in April 2012, and to date 12 developed and developing countries have endorsed the Principles.
Heikki Holmås, Norway's Minister of International Development, expressed in 2012 Norway's intention to review the loans granted by the country to developing countries, using the Principles as a basis. The audit was carried out earlier this year and was made public on 15 August 2013.
The audit was conducted by an international accounting firm under commission from the Ministry of Foreign Affairs and covered 34 debt contracts with seven countries (Egypt, Indonesia, Myanmar, Pakistan, Somalia, Sudan and Zimbabwe) amounting to nearly US$1.6 billion.
Norway thus becomes the first country in the world to conduct an independent and transparent investigation of its debt agreements with developing countries in order to make sure the nation is living up to its responsibilities as a lender to such countries. The audit report shows that the Principles are technically and politically able to guide sophisticated and very delicate public audits.
Two of the cornerstones of the Principles are co-responsibility of lenders and borrowers and a holistic approach to debt problems, with standards to be applied to sovereign borrowers and all kind of lenders and financial transactions.
In the official announcement of the audit report, Mr. Holmås said: "I am glad that Norway sets a new standard for the use of the new UN principles for responsible lending and borrowing, and encourage other countries to follow suit."
UNCTAD officials expressed the hope that the Norwegian audit will lead to initiatives by other governments demonstrating the will to implement the Principles and to promote co-responsibility in sovereign debt governance.