UNCTAD initiative aims at developing guidelines for sovereign debt that can spur development, avoid defaults or accumulation of heavy debt burdens; President of Iceland addresses meeting
Geneva, 17 September 2010 -- Officials meeting during the UNCTAD-sponsored World Investment Forum in China last week supported an initiative to develop a set of international principles on lending and borrowing by sovereign governments. Extended international dialogue is foreseen with the goal of adopting principles and guidelines that can reduce the prevalence of debt crises. It is also hoped that such guidelines can help these nations to lend and borrow in a way that leads to stable economic growth.
Against a background of renewed concerns over national debt burdens in the wake of the global financial crisis, government officials and specialists at the Conference on Sovereign Lending and Borrowing reviewed a first working draft of principles that had been prepared by an expert group coordinated by the UNCTAD secretariat.
Among the speakers from the podium was Ólafur Ragnar Grímsson, President of Iceland, who reviewed that country´s much-publicized debt crisis and said, "Iceland has never defaulted and never will."
Iceland now has high debt levels because of reckless behaviour by private borrowers, the President said. He told the meeting, "a loan always entails a risk," and so the design of principles that could avoid reckless behaviour should be encouraged. Eventually, he said, citizens have to pay for irresponsible decisions taken by their governments.
UNCTAD Secretary-General Supachai Panitchpakdi, in opening the session, said the first recorded debt crisis dates back nearly 2,500 years. Over the past 200 years, he added, there have been more than 250 sovereign default episodes.
"In recent years, we have witnessed a growing interest and engagement in responsible lending and borrowing by both lenders and borrowers," he said. "While debt crises cannot be avoided, setting standards for prudent responsible behaviour can play an important role in reducing the prevalence and cost of such crises."
Prof. Arthur G.O. Mutambara, Deputy Prime Minister of Zimbabwe, said in an address that investors have become excessively risk-averse, and that Africa, with its remarkable endowment of natural resources, is destined over time to become a net lender. However, he warned, "this bright future will require the change of some policies on the part of the developed countries." In particular, the presence of economic sanctions is an enormous obstacle to the development of Zimbabwe, he said.
And Ingrid Fiskaa, State Secretary of Foreign Affairs of Norway, the country that has provided initial funding for the project, told the meeting that while there are many initiatives aimed at avoiding excessive debt accumulation, there is a gap in the current system and substantial room for improvement. Norway supports other international initiatives, but a set of global standards would be very valuable. |She added that the United Nations is the most appropriate forum for coordinating such an initiative, thanks to its impartiality, universal membership, democratic structure, and the fact that, - as it is not a creditor, it does not face any conflict of interest.
Also in attendance at the conference were government Ministers from Argentina, Iran, Lesotho, and Zimbabwe, and senior representatives from Angola, Bolivia, Italy, Namibia, Panama, Spain, the United States, and Viet Nam, as well as such multilateral institutions as the Asian Development Bank, the International Monetary Fund (IMF), the "Paris Club" of creditor nations, and the United Nations Department of Economic and Social Affairs (UN DESA). A number of organizations representing civil society were also present, including Jubilee Germany and South Pacific, Norwegian Church Aid, and Third World Network.
During the day-long debate, varying views were expressed on the draft principles, but all participants supported the initiative of designing a set of principles to promote responsible sovereign lending and borrowing.
