The CADTM delegation to UNDP for a consultation on debt.

The major highlights of the year 2008 for the developmental world is two international conferences, the first at Accra, next September on aid effectiveness and the second at Doha at the end of November on financing development. The first conference aims to evaluate the Monterrey process (adopted in March 2002) and to redefine the new modalities in order to achieve the objectives of the Millennium Development Goals. Chapter V of the Monterrey consensus is devoted to external debt. It is in this framework that CADTM was invited to participate at a consultation on debt organised by UNDP on 29th and 30th of May. The main organisations and networks working on this issue were invited to contribute to the theme “Avoiding the 2015 debt crisis”. Six persons were present From CADTM: Victor Nzuzi (Democratic Republic du Congo), Aminata Tourre Barry (Mali), Mimoun Rahmani (Morocco), Fathi Chamkhi (Tunisia), Sushovan Dhar (India) and Myriam Bourgy (Belgium).

The discussion was around four principal issues: Debt sustainability in post-MDRI countries, Public debt in MICs and emerging market economies, Odious and illegitimate debt & Proposals for transparent institutional structures to prevent and resolve future debt crises, based on co-responsibility.

Debt sustainability in post-MDRI countries

The first session of the conference was devoted to debt sustainability. The speakers were Sitali Muytwa from Jubilee Zambia, Patricia Miranda from Jubilee Bolivia and Dusan Zivkovic from UNCTAD. It must be noted that the task of moderation of the session was given to a World Bank representative who highlighted that the HIPC initiative and MDRI were positive. The first two speakers presented the balance-sheet and the impacts of HIPC initiative and MDRI in Bolivia and Zambia. They showed a relative decline of the debt service and the debt stock However, the debt problem weighs heavily and has not been tackled in the desired manner as was hoped when these initiatives were put in place. Considering its proximity with the positions of developing countries, the presentation of the UNCTAD representative was deceiving. He greeted the two debt relief initiatives, the increasing importance of the role of the private funds and judged everything from the point of view of economic growth. Victor Nzuzi (NAD-RDC) intervened in the discussions and raised questions about the non-inclusion of illegitimate debt in the HIPC initiative and the failure of the initiative. Moreover, we cannot accept the term “debt sustainability” since the very term signifies that the countries should reimburse the maximum to their ability and above all create conditions to avoid any new debt crisis because that can endanger creditors and the overall capitalist economic system. It is really difficult to speak about debt sustainability when the debt itself is an encumbrance and impedes the access to fundamental needs for a large section of the population. The viability of debt can only be gauged in comparison to human rights. Aminata Barry (CAD-Mali) intervened on the question of democracy and the participation of the civil society organisations in the initiatives. In fact, the organisations consulted were often those that defended governmental positions. Myriam Bourgy intervened on the necessity of taking into account the indebtedness of private enterprises while measuring the debt-burden of countries. Indeed, a heavy debt-burden of the private banks can in future convert itself public debts as it happened during a number of economic crisis between 1990 and 2000. The entire session took note of the importance of the internal debt as a salient debt burden of developing countries. The question of aid was also discussed but the issue of South financing the North was never dealt with. The stakes are therefore to wipe out the funds that rest within the developing countries (control on profit repatriation which has multiplied 4.5 times between 2000 and 2006, exploitation of natural resources that genuinely benefit the countries...). The issue of vulture funds were touched and there was a consensus to fight vulture funds. However, that can take place by the Northern countries adopting laws in their parliament (as has been done by Belgium) as in the South, but also by a strong global struggle against the tax havens that house the vulture funds.

In the end, in response to UNCTAD; the private funds or the foundations like the ones run by Bill and Melinda Gates do not take into account the fundamental causes of the problems. The question of mosquito nets is a good instance of resolving the problem by “first-aid” without touching the “cause” of the disease (which necessitates an amelioration of the sanitary conditions for the population, research of vaccines...); it’s therefore crucial to look into the quality of aid without overlooking the fact that the private funds are linked to private economic interests which are as diverse as the actors involved in it.

Public debt in MICs and emerging market economies

Karina Saenz of CAIC, Ecuador, Kim-Marie Spence of CAPRI, Jamaica and Oscar Ugarteche deliberated on the new regional financial architecture. The presentation of Oscar Ugarteche was based on the formation of regional blocs that would create new institutions and new currencies. He projected the European Union model which for us is deplorable. The liberal EU that lacks social and democratic right is never an example worthy of projection. Sushovan Dhar (India) intervened by raising the question of the viability of such an architecture without a political change. Oscar replied that a world revolution is not necessary as the World Bank and the IMF have lost their weight. The IMF has already sold a part of their gold. Victor intervened on the regional currency and voiced opinions about de-linking the currency from political domination since it is normally indexed to another currency as is the case of CFA Franc.

Mimoun (Morocco) spoke on the importance of internal debt in MICs since there is a real transfer of external debt to the internal. The MICs have not benefited from HIPC; meanwhile, an active debt management have been applied to them. The same has been also applied to Morocco with conditionalities outside the HIPC initiative and MDRI.

Odious and illegitimate debt

The debate on illegitimate and odious debt was actively taken up. The World Bank and UNCTAD presented reports on this issue. A number of international conferences were held on this issue – as the one organised by Aktionfinanzplatz at Berne, Switzerland - where a number of academicians and also the organisations were present. In this session, Lidy Nacpil (Jubilee South) presented on the illegitimate debt. Sabine Michalowski from the University of Essex presented the contemporary debate on odious debt. According to her, there is a consensus among juridical academicians that the doctrine of odious debt is not recognised as a legal doctrine and that the doctrine should be applicable in public law. One of the possibilities to cancel the debt is to look at it from the point of view of jus cogens and whether the lending violate the advanced norms of international law or not. Jostein Hole Kobbeltvedt from the Norwegian church spoke about the Norwegian decision of debt cancellation, which was on the grounds of illegitimacy and co-responsibility. It is important to note that Norway took this decision outside the framework of the Paris Club and the other members of the Club wanted to bring sanctions against Norway for the breach of ‘solidarity’ within the members of the Club, it is shameful that the Club harbours such notions of solidarity. The Norwegian debt cancellation has more figurative impacts than the economic gains derived from the action.

Victor intervened to highlight the role of intellectuals in providing the poor, arsenals for struggle! The inclusion or the non-inclusion of odious debt hardly matters. There are pertinent criteria already enunciated which can be sufficiently applied and the people of the South can relate to that to repudiate the debt. Fathi Chamki (Tunisia) illustrated the concrete example of Tunisia where the contracted debt can be considered odious enough. Aminata Barry insisted on the debt audit to determine the illegitimacy and odiousness of debts.

Proposals for transparent institutional structures to prevent and resolve future debt crises, based on co-responsibility

Kunibert Raffer from University of Vienna as well as Jürgen Kaiser presented the international arbitration tribunal project based on the principles of law, impartiality and responsibility. On behalf of CADTM Sushovan précised that the arbitration tribunal is not the best of the solutions and as a matter of fact, the balances of forces and power should be taken into account. There is little doubt that the system favours the creditors. Vitalis Meja from Afrodad and Njoki Njehu intervened as speakers. The last speaker insisted on the debt audit and specifically the citizens’ audit of debt. The populace should be able to control the indebtedness of the state. The audit is without doubt is a mechanism to determine the responsibilities and to define which debts are illegitimate and odious. This could also force the creditors and the developing countries’ governments to take responsibilities. Victor intervened to remind the necessity of carrying out debt audits and campaign strategies across the countries taking inspiration from the Norwegian and Ecuadorian initiatives.