UN experts* today called on New York State authorities to adopt legislation designed to ensure that private creditors participate in international debt relief efforts on similar terms as public lenders.
"This bill is a golden opportunity that will allow countries in debt distress to shift their budgetary priorities and, by providing for better living conditions, reduce the risks for investors in these countries and create better opportunities," said the Special Rapporteur on extreme poverty and human rights, Olivier de Schutter, and the Independent Expert on foreign debt and human rights, Attiya Waris.
The experts welcomed the proposed "New York Taxpayer and International Debt Crises Prevention Act" currently under discussion: a legislation that would compel private sector creditors to participate in debt restructurings of distressed low- and middle-income countries on the same terms as public creditors. The expert on foreign debt expressed support for the proposed legislation in a letter to the US Government in April 2023.
"The proposed law would have a major impact in ensuring that States can protect the economic, social and cultural rights of their people instead of paying for unsustainable debts," they said. In 2021, low- and middle-income countries reportedly spent an average of 27.5 per cent of their budgets on interest and debt repayments - more than was spent on education, health and social protection combined.
The experts pointed out that 60 per cent of developing country debt is held by private creditors and that New York law governs 52 per cent of this global debt.
"If taxpayers contribute to public debt relief, private creditors should be obliged to participate on the same terms," they said. "Debt relief must be effective and fair for all, and its costs must be shared by private creditors as well."
The experts stressed that COVID-19, the energy crisis, rising food prices and inflation have led to an increase in unsustainable debt for many countries, with a particular impact on developing countries.
"Without debt relief, it would be impossible to make progress towards the UN Sustainable Development Goals, which have already suffered a serious setback due to the pandemic and increasing international crises," they said.
"Many poor people can barely afford food and minimum dietary needs for health. It is precisely in times of crisis that States must be able to ensure social protection and food security for all people in their country," the experts said. "Everyone has an interest in countries being able to invest in social protection, health care, housing, education and food security, instead of devoting more and more of their limited budgets to debt repayments."
