FTAP-Update: February 2016

  1. Debt on the G20 agenda

Sovereign debt management has been put onto the G20 agenda for this year’s summit in Huangzhou. President Xi Jinping has even been a bit more explicit in his outline of the issues which the Chinese presidency wants to see discussed (See page 8 of this speech under the header “Improving International Financial Architecture to Meet Future Challenges”):

The G20 should work together to establish a more stable international monetary and financial system, improve macro-prudential management, facilitate orderly cross-border capital movements, strengthen global financial safety net, and promote orderly sovereign debt restructuring.

Europeans and US-Americans reportedly have been trying to narrow the issue down to exclusively discussing (a) the universal application of collective action clauses, and (b) the enhancement of the Paris Club. All those, who have the opportunity to speak to decision makers of G20 members should encourage them to support the Chinese quest for a broader and open agenda on debt.

erlassjahr.de has started to push for the same item to also be included in the German presidency’s agenda in 2017 through advocacy and a public campaign.

 

  1. UNCTAD-Roadmap

Last fall UNCAD published the Roadmap and Guide to Sovereign Debt Workout, which was co-drafted by some of the signatories of the Academics’ Call. It briefly outlines the practical options for an indebted sovereign, who would seek a fair and comprehensive way to restructure its debt. Then the document gives an extensive legal underpinning to the principles behind a rule-of-law-based debt workout.

The roadmap has inspired the resolution which concluded the work of the ad-hoc group in the UN General Assembly in September 2015. Regrettably the UN did not succeed in drafting the legal principles for a sovereign debt workout”, which it had committed to do through its resolution in September 2014. However, the process will go on under the roof of the Financing for Development process. The next step is the FfD Forum scheduled for spring 2016, most likely back to back with the World Bank/IMF spring meetings mid-April 2016.

 

  1. More countries deeper in debt

On a global scale the low interest rates and abundance of rent-seeking capital have led to more capital flowing into the global south in the past years. Based on IMF and WB data erlassjahr.de has found 108 countries outside the OECD having at least one of five public and external debt indicators beyond the lowest critical threshold. Based on end-2013 data, the number last year still was 83. Several publications by the IMF have recently warned against a growing number of low income developing countries entering dangerous terrain through extensive external borrowing via sovereign bonds or syndicated bank loans. erlassjahr.de’s analysis will be available (in German) early April.

 

  1. Share the Academics’ Call

The call is still open for signing. Please share it with colleagues, who have not signed yet. It is online available here.