Magazine article New Internationalist

Break the Chains [Need for Debt Review Body]

Magazine article New Internationalist

Break the Chains [Need for Debt Review Body]

Article excerpt

When delegates from Jubilee 2000 Coalitions from 40 countries met in Rome in November 1998 they were adamant that tough conditions should be imposed on debtor nations in return for debt relief.

However, they made it clear that these conditions had to be monitored and controlled by citizens of the debtor nation itself. By ensuring that the voices of women's organizations, opposition parties, trade unions and other non-government bodies are heard, Jubilee delegates stressed that debt relief could be doubly effective: first, as money to benefit the poor; second, as empowerment of the poor.

My contribution to the debate is to push for a mechanism that would help to ensure this. Because there is no international insolvency law -- in fact, no international financial law at all -- creditors dominate by default. The International Monetary Fund (IMF) acts as their agent and representative. IMF funds are used to bail out private and public creditors threatened with losses and to set conditions for new loans to pay off old ones.

These conditions are biased in favour of creditor interests and oblige debtors to make repayments before any other spending. As a result, creditors play the role of plaintiff, judge and jury in the court of international debt. These creditors use loans to promote their own interests and then use negotiations as a way of exercising leverage over sovereign economies.

This arbitrary, biased and highly protectionist system has worked for years without any real challenge. My proposal (which owes much to the ideas of Professor Kunibert Rafter of the University of Vienna) is for a new mechanism to guarantee independent arbitration.

The core of this proposal is for an independent Debt Review Body (DRB) that would act as a binding arbitration panel. The appointment and work of the DRB could be overseen by the UN. The process for setting up and maintaining the DRB need not be bureaucratic or cumbersome. It requires only the confidence of the debtor government on the one hand and creditors on the other.

An independent Debt Review Body would defend the sovereignty of the debtor nation, strengthening democracy and accountability whilst also being fair to creditors. Its first task would be to commission a full audit of outstanding public debt. …

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