Two NGO members and a representative of the International Monetary Fund debated on debt and international insolvency this afternoon, within the Global Forum.
Everyone agrees that existing debt structures don’t work well, said Prakash Loungani, Foreign Relations Official from the International Monetary Fund (IMF), stating the need for clear and fair framework for debt restructuring. The lack of such a framework currently pushes countries to wait too long before they recognize their debt problem, because they don’t know and fear the way their debt will be restructured.
Debt arbitration should be performed by an independent international arbitration court and not by the IMF, according to Jüergen Kaiser, of the German Jubilee, and Barbara Kalima, of the African Forum and Network on Debt Development. The IMF a creditor itself, currently acts as judge and jury. Loungani agreed that the IMF should be kept at a distance from the debt arbitration process.
Debts should be judged according to their legitimacy, proposed Kalima, saying that debts that were contracted by corrupt governments, for example, should be considered illegitimate, a proposal, which Loungani rejected. Kalima also suggested that creditors be held accountable when they give loans for economic development projects that fail or lead to economic crises.
Maria Carmen Montes, of Mexico, stood up from the audience to support this proposal, saying that an IMF condition for granting loans to Mexico is that salaries shouldn’t be raised, and that it makes these loans usury. The IMF isn’t always on the side of private sector, concluded Loungani, saying that in some cases, they cannot push forward some reforms because of the private sector’s opposition, and that in these cases, the IMF needs the help of NGOs to pass these reforms.
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