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to G7 countries – April 2003
During his presidency of the G8, the French
President promised he would place debt cancellation high on its agenda and
submit proposals on the issue to the other G8 members. United by the reference
to the international law of human
rights, we debt campaigners from G7 countries would like to take this
opportunity to share our concerns and make some proposals of our own.
France has consistently argued that the G8
should play its full role in meeting internationally-agreed commitments, in
particular the Millennium Development Goals (MDGs). Even the goal of halving
extreme poverty, which numerous NGOs consider insufficient, will not be reached
by 2015 without a considerable global effort by the international community to
mobilize new financial resources. Greater debt relief, if on top of existing ODA
flows, could play an important role in this respect.
sustainability: towards a human development approach
far as the HIPC initiative is concerned, France’s
key priorities are (A) the enhancement of this initiative and (B) the
achievement of debt sustainability beyond completion point. Yet, the
International Financial Institutions (IFIs) have admitted that this initiative
has so far failed to make the debt of HIPC countries sustainable.
order to ensure debt sustainability beyond completion point, we believe it is
necessary to break with the principle of prioritising debt service over the
fulfilment of basic human needs. We argue in favour of an approach based instead
on a country’s ability to fund human development. This approach sets as an
inviolable principle the satisfaction of basic needs. In this respect, we call
for an independent review of debt sustainability to be urgently undertaken.
Monterrey, the international community committed itself to linking debt
sustainability analysis to the funding required to achieve the MDGs. G8
countries, who have been holding a sizeable part of debt, should fulfil this
commitment and be prepared to accept the consequences of such a human development
approach to sustainability:
opening-up of debt relief to all countries.
Debt threatens the development of many countries, including some that are not
eligible to the HIPC initiative. In no country should debt compromise the
ability to meet basic human needs. A human development approach should underlie
the rationale of the
“approach for dealing with non-IDA countries within the Paris Club” which G7
want to develop (2003,
debt cancellation for most HIPCs.
cancellation of their entire debt, most HIPCs will not be able to achieve the
MDGs. A 100% cancellation would at the same time provide those countries with a
higher multilateral contribution
to make effective this debt cancellation. G7 countries have promised to cancel
total bilateral HIPC debt. As a result of the HIPC initiative, the IFIs have
become the main HIPC creditors. Given the scale of human development needs, the
IFIs’ majority shareholders, which belong to the G8, ought to clearly declare
themselves in favour of a greater multilateral commitment, including in many
cases full debt cancellation by the IFIs, without imposing any conditionalities
that would affect basic human rights. The IFIs are in a position to contribute
significantly to these debt cancellations from their own resources, without in
any way jeopardizing future commitments.
For a Fair
and Transparent Arbitration Procedure
occurrence of financial crises in the 1990s, and specifically the Argentine
crisis, has evidenced the need for the reform of the international financial
system. The problem is primarily structural. It is exhibited by the asymmetry
between creditors and debtors in the treatment of international debt, which must
be handled as part of a framework based on debtor and creditor co-responsibility
in debt accumulation, the illegitimacy of certain debts, and the inviolability
of fundamental economic, social and cultural rights.
fact that a debate has taken place recently on the IMF-launched Sovereign Debt
Restructuring Mechanism (SDRM) shows the acknowledgement that a negotiated debt
resolution framework is necessary. To that extent and although we consider that
this mechanism does not include the indispensable conditions for a fair and
transparent debt treatment, we welcome it favourably.
that it is not feasible now to implement the SDRM proposal”, G7 Finance
Ministers asserted on April 12th that “work should continue on
issues raised in the SDRM discussions”. In our view, this should be the
occasion to reconsider the issue in the light of civil society’s alternative
proposals. In that respect, we are arguing for the establishment of an
international insolvency process that is both fair and transparent, notably modelled after chapter 9 of the
US-Insolvency Code (conceived for debtors with governmental powers).
are especially defending the following principles:
The process shall be open to all debtor countries.
An integrated approach shall take all debts into account.
The third body shall be neutral. Debt sustainability shall be judged by
this independent panel and the role of the IMF shall be restricted to that of a
Independent debt sustainability analysis shall be based on human
development financing needs.
All concerned parties shall participate in a transparent process. In
particular, this process should be open to civil society groups of debtor
The subsistence level shall be protected and the standstill measure shall
be automatically triggered.
encourage debtor countries to seek protection through an arbitration process, on
a timely basis, before debt crises occur.
recognition of all illegitimate debts
welcome the recognition by the U.S.
secretary, John Snow,
concerning the Iraqi debt, that a debt contracted by a
dictator should not be payable by the population after the regime falls. We
would like to remind the G8 that there have been more cases of odious debt, for
instance Nigeria and Indonesia. The debt of all countries should be treated on
an equal basis.
Eurodad, “Going the Extra Mile: How and Why Creditors Should Go Further
with Debt Reduction for the Poorest Countries”, February 2002.