Make a Reform Process Visible and Sustainable "Frameworks for Sovereign Debt Restructuring" New York Nov. 17th 2014.

Präsentation zum Thema: "Make a Reform Process Visible and Sustainable "Frameworks for Sovereign Debt Restructuring" New York Nov. 17th 2014."—  Präsentation transkript:

1 Make a Reform Process Visible and Sustainable "Frameworks for Sovereign Debt Restructuring" New York Nov. 17th 2014

2 Three principles will are essential for a reformed DWM it needs to restructure debt in a single comprehensive process, with no payment obligations un-considered; it needs to allow for an impartial decision making about the terms of any debt restructuring, and this decision must be based on an impartial assessment of the debtor's situation. erlassjahr.de – Entwicklung braucht Entschuldung, Carl-Mosterts-Platz 1, 40477 Düsseldorf

3 Few historical precedents Indonesia 1968: LIC with 109 US-$ pc- income and US-$ 2.1bn external debt erlassjahr.de – Entwicklung braucht Entschuldung, Carl-Mosterts-Platz 1, 40477 Düsseldorf

4 How to break the stalemate: A mediator needed erlassjahr.de – Entwicklung braucht Entschuldung, Carl-Mosterts-Platz 1, 40477 Düsseldorf

5 Impartiality pays off After a period of shuttle diplomacy Abs made a proposal, which foresaw the full repayment of the capital and the full cancellation of past due and current interest - uniformly on all claims. With a face saving deviation of an across-the-board interest rate of 0.5%, Abs’ proposal was implemented. The agreement was a speedy solution to a complex problem, and it led to a sustainable debt situation in Indonesia until the Asian crisis struck in 1998. erlassjahr.de – Entwicklung braucht Entschuldung, Carl-Mosterts-Platz 1, 40477 Düsseldorf

6 In contrast: a sobering recent experience Grenada in default since April 2013 Conference of Churches suggests a creditors’ conference in October 2013 Agreement on need of debt relief around 50% of EDT among GoG, civil society and IMF. Following IMF guidance Grenada instead discusses restructuring with bondholders, faces litigation on bilateral debt to Taiwan Still in default in November 2014 erlassjahr.de – Entwicklung braucht Entschuldung, Carl-Mosterts-Platz 1, 40477 Düsseldorf

7 Can impartiality be institutionalized? Debtor needs an institution to turn to in order to trigger a comprehensive and impartially led restructuring A “Sovereign Debt Forum” is an option Going beyond an SDF: –A small standing institution –Potentially covering the full range from informal mediation to binding arbitration erlassjahr.de – Entwicklung braucht Entschuldung, Carl-Mosterts-Platz 1, 40477 Düsseldorf

8 The “institution” supports sovereign debtors with regard to debt workout procedures; facilitates the organisation of exploratory meetings with all creditors supports the quest for expertise/ independent assessment with regard to debt sustainability mediates a conciliatory solution between a sovereign and all its creditors upon request by the sovereign organizes a more formal and binding debt arbitration process based on UNCITRAL principles and rules, if more informal instruments facilitation, mediation, conciliation fail. runs a depository of debt restructuring experiences and best practices emerges over time. erlassjahr.de – Entwicklung braucht Entschuldung, Carl-Mosterts-Platz 1, 40477 Düsseldorf

9 Earlier proposals towards institutionalization. For instance: erlassjahr.de – Entwicklung braucht Entschuldung, Carl-Mosterts-Platz 1, 40477 Düsseldorf Permanent Court of Arbitration in the Hague Scotland as host of debt arbitration

10 “…open-ended consultation process on the best possible option for a sovereign debt workout with the involvement of all relevant stakeholders, including the private sector, academia and civil society…” For the sake of the UNGA- process: Beware of any…. erlassjahr.de – Entwicklung braucht Entschuldung, Carl-Mosterts-Platz 1, 40477 Düsseldorf

11 Because there are countries under threat of new debt crises AfghanistanBhutan Burkina FasoBurundi CameroonCape Verde Central African RepublicComoros ChadDR Congo Cote d’IvoireDjibuti DominicaThe Gambia GhanaGrenada GuineaGuinea-Bissau GuyanaHaiti Kyrgyz RepublicLao PDR LesothoMalawi MaliMaldives Marshall IslandsMauretania MongoliaMozambique NicaraguaNiger SamoaSao Tomé & Principe Sierra LeoneSolomon Islands St. LuciaSt.Vincent and the Grenadines TajikistanTogo TongaTuvalu YemenKiribati