Global IssuesAFRICA: Arbitration Mechanism Demanded to End Scourge of Debt
International debt campaigners are calling for the establishment of a debt arbitration mechanism to respond to the difficulties that many countries of the South are increasingly facing as they attempt to service debt arrears to international lenders.
Campaigners met in Johannesburg, South Africa, at a two-day international conference on a ‘‘Fair and Transparent Arbitration Mechanism on Illegitimate and Odious Debts’’. They oppose the status quo as one in which countries of the South are pushed further into debt.
They argue that the power wielded by the international financial institutions (IFIs) needs a rethink to protect the poor from the economic ravages that come with debt repayments. The campaigners suggested the establishment of a debt arbitration process to balance the interests of both creditors and debtors, particularly in the current global financial crisis.
‘‘There is need for an approach that can deliver a durable solution to the debt crisis, acknowledging that debtors and creditors must share the responsibility for preventing and resolving unsustainable debt situations,’’ according to Cephas Lumina, a United Nations’ independent expert on the effects of foreign debt and related international financial obligations of states on the full enjoyment of rights.
Speaking in his personal capacity at the conference, he added that it was important to come up with a new debt solving mechanism outside the existing Paris and London Club framework.
‘‘There is a lack of fair and transparent global governance, manifested in the dominance of creditors with regard to decision-making on resolving the debt crisis and the lack of debtor protection,’’ argued Lumina.
Opa Kampijimpanga, African Forum and Network on Debt and Development (AFRODAD) chairperson, said the current debt repayment mechanisms are brutal in nature and must be changed.
AFRODAD organised the conference in conjunction with the Economic Justice Network (EJN) of the Fellowship of Christian Councils in Southern Africa (FOCCISA). AFRODAD is an organisation born out of the desire to secure lasting solutions to Africa's mounting debt problem which has impacted negatively on the continent's development processes. EJN is a non-profit southern African organisation.
‘‘The current debt process is driven by a system which is brutal and capitalist in nature. We are calling for equal responsibility on debtor and creditor in view of corruption and the wrong policy advice given. The creditors must understand that they also make mistakes and should pay for their mistakes and not lay the full responsibility on debtor countries.’’
He added that there was need to put in place a mechanism to protect countries of the South from some of the policy prescriptions put forward by the IFIs (the World Bank and the International Monetary Fund).
‘‘There must be an arbitration mechanism formulated through the United Nations (UN) to give ordinary people who are suffering a voice to fight for their rights because their governments have proved to incapable of doing this,’’ demanded Kampijimpanga.
But who will play that role if governments are too weak to do so? ‘‘Civil society organisations can do it on behalf of citizens and present cases at the UN in line with the UN Charter which protects the rights of citizens,’’ suggested Kampijimpanga. ‘‘All we want is space to do so and a voice to say it.’’
He lamented the poor responses of the international creditors to the problem of debt repayment in Africa, citing the Heavily Indebted Poor Countries (HIPC) initiative and the Multilateral Debt Relief Initiative (MDRI) as case studies.
HIPC was first launched in 1996 by the IMF and the World Bank. It was revised in 1999, linking debt relief to poverty reduction, macroeconomic stability and structural reform.
In order to qualify for debt relief under HIPC, a country must have an unsustainable debt burden, establish a track record of reforms and policies through World Bank and IMF-supported programmes and prepare a poverty reduction strategy paper (PRSP) through a broad-based participatory process.
PRSPs are the successor policy plans to the notorious structural adjustment programmes (SAPs) started in the 1980s.
This is allegedly aimed at reducing the amount of money paid by countries as debt repayments to international lending institutions. But the reality on the ground shows the contrary.
Several studies show that some countries are still spending more each year on servicing debt than they do on national programmes aimed at reducing poverty and improving a variety of social conditions, including health care, education nutrition and life expectancy.
In its 2008 report, the Millennium Development Goals (MDG) Gap Task Force found out that the MDG target of dealing comprehensively with the debt problems of developing countries has not been achieved.
Despite the HIPC and MDRI debt relief and corresponding increases in social expenditures, a large number of developing countries still spend more on debt servicing than on public education or health.
‘‘These were just blueprints from the IMF and World Bank with no input from African countries. It was supposed to provide a way out of debt but it achieved the opposite,’’ argued Kampijimpanga. ‘‘It is this one-size-fits-all mechanism that we want changed.’’
Other speakers said the current debt repayment mechanism identifies the debtor countries as villains and put more emphasis on repayment than on realising the needs of the citizens, human rights and MDGs.
An example was given of the IMF’s insistence that Zimbabwe must repay a loan of millions of dollars in debt arrears before it can release more loans. This is despite the fact that the new Zimbabwe government is struggling to provide basic services such as health care, clean water and education.
‘‘It’s a ridiculous demand by the IMF which should not be taken seriously’’ declared Lumina Vitalis Meja from AFRODAD. He said it is high time a fair and transparent arbitration mechanism was put in place. ‘‘We must make use of the UN to champion for stronger initiatives and tackle the financial institutions.’’
But debt campaigner Charles Abraham believes there must be a consensus between the debtor and the creditor before such a mechanism can be established.
‘‘You can only have arbitration by consent. There is no point in having it if there is no consensus. Both parties must agree, elect a forum and agree on composition of arbitration board members, decide on rules to be applicable and how the arbitration will play out,’’ proposed Abrahams.
Lumina wants the arbitration body to be under the aegis of the UN: ‘‘The establishment of an inclusive and equitable international debt arbitration mechanism must be under UN, which is the only international body with sufficient legitimacy to take a leading role in efforts to create an acceptable debt resolution.’’
Jurgen Kaiser from Jubilee Germany suggested a more challenging way to solve the debt issue: ‘‘Debtor countries should just repudiate the debt. The key lies in them refusing to pay debts and to stop negotiating in Paris rather negotiate in African capitals.
‘‘They should set the agenda for the meetings and stop paying the creditors who do not attend and insist on the meetings being chaired by the UN secretary general as a provisional chair,’’ insisted Kaiser.
© Inter Press Service (2009) — All Rights ReservedOriginal source: Inter Press Service