(New York, April 23, 2013)
Ambassador Osorio chaired the ECOSOC Special Meeting on external debt sustainability and development
Ambassador Nestor Osorio, in his capacity as Chairman of the Economic and Social Council (ECOSOC) held on April 23 in the UN a Special Meeting of ECOSOC on "External debt sustainability and development: the experience of the crisis debt and ongoing work on the mechanism for sovereign debt restructuring and resolution of debt problems". The meeting was attended by Professor Joseph Stiglitz (Nobel Prize on Economics, 2001), senior representatives and senior official of the international financial and trade institutions, and representatives of civil society and the private sector.
During his statement, Ambassador Osorio stated that the prevention and management of the sovereign debt crisis has taken on new urgency with the current debt crisis in some Eurozone countries, which showed that debt problems can be a systemic risk and a threat to international financial stability. Ambassador Osorio recognized that the existing structure for sovereign debt restructuring is far from ideal, because although the inclusion of collective action clauses in bond contracts and the development of a voluntary code of conduct to guide the negotiations sovereign debt represent an important advance, it is essential to move towards a better framework for sovereign debt restructuring, as a fundamental aspect of global economic governance.
Opening remarks at ECOSOC Special meeting on "External debt sustainability and development: Lessons learned from debt crises and ongoing work on sovereign debt restructuring and debt resolution mechanisms"
Ladies and Gentlemen,
It's a pleasure for me to welcome all of you to this Special meeting on external debt sustainability and development, to consider lessons learned from debt crises and the ongoing work on sovereign debt restructuring and debt resolution mechanisms.
The General Assembly, in its resolution 67/198, recognized the importance of a timely, effective, comprehensive and durable solution to debt problems in order to promote economic growth and development. It made calls for coordinated policies aimed at fostering debt financing, debt relief and debt restructuring and efforts to improve the existing architecture for sovereign debt restructuring. It also encouraged all relevant entities within the United Nations system to continue to study and examine the need for, and feasibility of, a sovereign debt restructuring and debt resolution mechanism, with the participation of all relevant stakeholders. This meeting is an important step in that regard. The United Nations Department of Economic and Social Affairs and the United Nations Conference for Trade and Development (UNCTAD) have been playing an important role in engaging experts and stakeholders to garner ideas and proposals for enhancing the architecture for resolving debt problems. Today's event builds on the General Assembly event in October last year. In that meeting, Member States stressed the high costs that sovereign debt distress imposes on the populations of the affected countries, and the importance of coordinated efforts to find effective and timely solutions to debt crises. While there were different views on the desirability of a structured mechanism for the resolution of sovereign debt crises, participants agreed that this discussion should be at the core of any debate concerning the reform of the international financial architecture. They also agreed that given its unquestioned legitimacy and convening power, the United Nations should be the appropriate forum for this discussion. I hope that today's exchange of views and updates on ongoing work will help build momentum to find concrete solutions for countries that are facing problems of debt overhang and debt servicing.
The debate on the architecture for sovereign debt restructuring is not new. Discussions on a solution to sovereign debt distress took place in the 1980s at the time of the Latin American debt crises, and again in the 1990s and early 2000s at the time of debt distress in many emerging market and developing countries. The Highly-Indebted Poor Countries (HIPC) initiative and Multilateral Debt Relief Initiative (MDRI) contributed greatly to addressing debt overhang in many low income countries. In addition, the growth performance of the developing world, along with prudent macroeconomic policies, has led to an improvement in debt indicators in many developing countries. Nevertheless, it´s important to continue efforts to increase support for institutional capacity building in developing countries to enhance sustainable debt management as an integral part of national development strategies.
It´s well known that debt restructurings can have drastic adverse consequences for economic growth, trade, access to international capital markets, banks and other financial institutions. Sovereign debt crises can threaten financial, economic and political stability of the affected country. Today, the challenge of preventing and managing sovereign debt crises has taken on a new urgency with the ongoing debt crisis of some European countries, which demonstrate that debt problems can pose a systemic risk, and a threat to international financial stability.
The difference between today's crisis and other recent crises is that, today, problems related to sovereign debt are not confined to emerging markets or low income countries. Furthermore, ongoing debt problems in some Euro zone countries have had far-reaching implications for many economies across the world, which has made the resolution of debt problems a global concern. I hope today's discussion will consider issues of debt sustainability and resolution from the perspective of both developed and developing countries.
Yesterday, this Council held its Special high-level meeting with the Bretton Woods institutions, the World Trade Organization and the United Nations Conference on Trade and Development. The overall theme of the meeting was "Coherence, coordination and cooperation in the context of financing for sustainable development and the post-2015 development agenda." The debate on sovereign debt restructuring has important implications for the financing of sustainable development and the post-2015 development agenda. Countries in debt distress are generally unable to attract necessary financing for sustainable development. Furthermore, countries with debt overhangs often spend a large proportion of public resources on debt servicing, and are unable to allocate public revenue to long-term investments in crucial sectors for sustainable development such as infrastructure, low-carbon projects, innovation and technology related, and the financing of small and medium sized enterprises.
An effective strategy of financing for sustainable development will require domestic resource mobilization, the fulfilment of all official development assistance commitments and the use of innovative mechanisms of financing. On this regard, the international community needs to promote responsible borrowing and lending, along with improved debt management. The existing structure for restructuring sovereign debt is far from been ideal. Even if the inclusion of collective action clauses in bond contracts and the development of a voluntary code of conduct to guide sovereign debt restructuring negotiations represent an important progress, there is still room for improvement, through the establishment of a better framework for the restructuring of sovereign debt.
It will be up to the Member States to determine the scope and pace of work. I remain ready to engage with all of them. I am also committed to enabling ECOSOC to strengthen relations with the international financial institutions such as the World Bank and the IMF, and other stake-holders in the pursuit of these objectives.
Excellencies, The need for improved sovereign debt restructurings is a critical aspect of the global economic governance, given the increased demand for reopening the discussion on the desirability of a structured mechanism to sovereign debt restructuring. I hope that today's exchange of views will be productive, and will contribute with many innovative ideas and policy approaches in this important area.
I would also take this opportunity to express my sincere appreciation to the Financing for Development Office of UN-DESA for taking the lead in organizing today's event.
I thank you for your attention.