During the first day of UNCTAD's 8th Debt Management Conference, held in Geneva from 14 to 18 November, UNCTAD released the second draft of the Principles on Responsible Sovereign Lending and Borrowing. The new draft has emerged after a series of bilateral and high level regional governmental consultations and subsequent refinements introduced by the Expert Group established for that purpose.
Work on the proposed standards began at the height of the global financial and economic crisis in 2009, as the decade-long credit boom mutated into a sovereign debt crisis. The principles have the potential to reduce the prevalence of sovereign debt crises, maintain stable economic growth and support the achievement of the Millennium Development Goals.
The Debt Management Conference was opened by the Secretary General of UNCTAD, Dr. Supachai Panitchpakdi and the President of Iceland, H.E. Mr. Ólafur Ragnar Grìmsson who highlighted the crucial importance of Principles "that emphasize the responsibility of borrowers and deal extensively with the duties of lenders."
The panelists and discussants of the session discussing the Principles included eminent policy makers such as Mr. Hernán Lorenzino, Secretary of Finance of Argentina; Mrs. Raya Haffar El Hassan, Minister of Finance of Lebanon (2009-2011); Mr. Arvinn Eikeland Gadgil, Junior Minister of Environment and Development Cooperation of Norway; Mr. André Lemercier Georges, Minister of Economy and Finance of Haiti; Mr. Sinan Al Shabibi, Governor of the Central Bank of Iraq, and Mr. Lee Buchheit, Senior Partner, Sovereign Practice Group at Cleary Gottlieb Steen and Hamilton, LLP, USA.
The Principles were widely supported by the discussants. As stated by President Grìmsson "The need for comprehensive reforms and wide-ranging measures is now recognized by all and therefore the UNCTAD proposal for the Principles is not only timely but could also form an important pillar in the new global financial structure.” Several speakers emphasized that many, if not most of the proposed Principles currently exist in their own domestic legislations. The value added of the Principles is that they go one step further by establishing clear responsibilities for both sovereign borrowers and lenders in debt contracting at the international level. Thus, they are tackling issues raised by sovereign debt at the global level.
The Government of Norway, the major donor of the initiative on Responsible Sovereign Financing, reiterated its support and commended UNCTAD for the progress made since the discussions on the first draft of the Principles in Xiamen, China in 2010. The Norwegian delegate also suggested that the discussion about implementation of these Principles should now start. Mr. Hernán Lorenzino stated that the Principles are “good news” as they would help to prevent crises.
