lt p gt lt font color quot 999999 quot gt lt img width quot 300 quot height quot 197 quot src quot http cdn ipsnews net Library 2016 11 20161031_115212 e1478613613867 300×197 jpg quot class quot attachment medium wp post image quot alt quot The panel during the G77 event on debt restructuring Credit G77 IPS quot gt lt p class quot wp caption text quot gt The panel during the G77 event on debt restructuring Credit G77 IPS lt p gt lt font gt lt p gt lt p gt By Tharanga Yakupitiyage and Lyndal Rowlands lt br gt UNITED NATIONS Nov 8 2016 IPS lt p gt lt p gt Despite many developing countries facing a very real risk of falling into debt crisis amp 8211 the current options available to assist countries to manage their debts are surprisingly lacking lt p gt lt p gt lt span id quot more 147675 quot gt lt span gt lt p gt lt p gt This scenario formed the basis of discussions on Monday 31 October at a Group of 77 G77 seminar on ldquo Sovereign Debt Vulnerabilities and the Opportunity for a New Debt Workout Mechanism building on the UN General Assembly process rdquo lt p gt lt p gt ldquo The challenging fact is that many countries hellip remain vulnerable to debt crises rdquo said Thai Ambassador and G77 Chair Virachai Plasai in his opening address lt p gt lt p gt Other speakers at the event echoed Plasai rsquo s sentiments during discussions moderated by Ambassador Ruben Zamora permanent representative of El Salvador to the UN lt p gt lt p gt ldquo The dramatic fall in commodity export prices and historically low interest rates have been key ingredients for a scenario which shows disturbing similarities to the build up phase of the third world debt crisis of the 1980s which cost in many countries a lsquo lost decade of development rsquo rdquo said Ambassador Sacha Llorenty Permanent Representative of the Plurinational State of Bolivia to the United Nations lt p gt lt p gt Ambassador Llorenty was also the Chair of the United Nations General Assembly Ad Hoc Committee on Sovereign Debt Restructuring Process that resulted in nbsp the adoption of UNGA resolution 69 319 that approved the nine UN principles for sovereign debt restructuring processes lt p gt lt p gt Speakers also noted that underlying issues which contributed to previous debt crises have not been adequately addressed lt p gt lt p gt ldquo The root of the debt problem has not been tackled or solved therefore the debt crisis should be on the top of the policy agenda rdquo said Bettina Luise R uuml rup Executive Director Friedrich Ebert Stiftung New York Office lt p gt ldquo The root of the debt problem has not been tackled or solved therefore the debt crisis should be on the top of the policy agenda rdquo Bettina Luise R uuml rup lt br gt lt font size quot 1 quot gt lt font gt lt p gt Executive Director of Jubilee USA Eric LeCompte echoed these sentiments noting the importance of preventative measures lt p gt lt p gt ldquo Financial crisis is a recurring problem Unless we have something in place that actually is a preventive measure for crises we are going to see crises become worse and we rsquo re going to see no particular ways to protect vulnerable populations rdquo he said lt p gt lt p gt Dessima Williams Special Advisor of Implementation of SDGs in the Office of the President of the General Assembly noted that despite debt forgiveness efforts for the world rsquo s poorest countries in the 1980s and 1990s debt has again begun to increase since the global economic crisis lt p gt lt p gt Williams also noted that debt is not only owed to other governments and development banks but that ldquo a large share of debt is owed to the private sector rdquo lt p gt lt p gt Marilou Uy Director of the Secretariat of the Intergovernmental Group of Twenty Four on International Monetary Affairs and Development G 24 also noted that increasing private sector debt could be a potential cause for concern lt p gt lt p gt ldquo A particular worry expressed in the recent International Monetary Fund fiscal monitor hellip is that while government debt has remained moderate the debt of the corporate sector across major emerging markets has risen sharply in the past few years rdquo lt p gt lt p gt However despite the serious threats debt crises pose to sustainable development currently the international mechanisms that exist to address the problem are remarkably lacking lt p gt lt p gt In his keynote address American Economist Joseph Stiglitz told delegates at the G77 event that these issues stem from the lack of a sound financial structure lt p gt lt p gt ldquo The current non system is flawed and doesn rsquo t work rdquo he stated as he called for a new debt restructuring process lt p gt lt p gt Existing ldquo gaps rdquo in the international financial and legal systems have created opportunities for entities such as vulture funds to take advantage of distressed developing nations undermining any progress towards a new debt structure Stiglitz noted lt p gt lt p gt Meanwhile as LeCompte pointed out governments which fall into debt crisis are unable to declare bankruptcy since bankruptcy is a measure which is only available at the domestic level lt p gt lt p gt Previous rounds of debt forgiveness have also proved to be only temporary fixes lt p gt lt p gt Raphael Otieno Director of Debt Management Programme Macroeconomic and Financial Management Institute of Eastern and Southern Africa said that many African countries ldquo started accumulating debt very aggressively rdquo after previous rounds of debt forgiveness lt p gt lt p gt Debt increases in countries like Angola and Ethiopia are ldquo very worrying rdquo said Otieno lt p gt lt p gt Meanwhile the measures imposed on countries to manage their debts can also be financially crippling as Isidro L oacute pez Hern aacute ndez Deputy and Spokesman on the Audit of Public Debt Assembly of Madrid Spain explained ldquo We are tied in a sort of metal cage rdquo said Hern aacute ndez noting that when the government in Spain has even minor a surplus this must be directed back into debt repayment rather than investing in Spain rsquo s future lt p gt lt p gt lt strong gt A Fair Debt Workout lt strong gt lt p gt lt p gt Plasai urged for the creation of a ldquo fair speedy and efficient debt workout rdquo that involves close collaboration between debtors and creditors to resolve unsustainable debt levels lt p gt lt p gt In order to restore debt sustainability Stigliz called for the implementation of a ldquo soft law regime rdquo based on the UN General Assembly rsquo s principles on debt restructuring adopted in 2015 These lt a href quot http unctad org en pages newsdetails aspx OriginalVersionID 1074 quot data saferedirecturl quot https www google com url hl en amp amp q http unctad org en pages newsdetails aspx OriginalVersionID 3D1074 amp amp source gmail amp amp ust 1478699138540000 amp amp usg AFQjCNGz55itilo_aUXen6ofUiBcxkX7OA quot gt international principles of laws lt a gt will help encourage cooperation and a ldquo healthier environment rdquo for debtors and creditors said Stiglitz lt p gt lt p gt LeCompte echoed similar sentiments highlighting the importance of laws around responsible and sustainable lending and borrowing lt p gt lt p gt ldquo We need to figure out at the United Nations how do we start to move debt restructuring into soft law how do we start to create a framework and structure that allows hellip for problems to be worked out in a more responsible way rdquo he told IPS lt p gt lt p gt While the threat of debt crises can have significant negative impacts on development speakers at the event also acknowledged that sustainably managed debt levels can also be beneficial for governments seeking to achieve the Sustainable Development Goals lt p gt lt p gt ldquo Borrowing is an important tool to finance sustainable development investments Debt financing can support growth and smoothen the business cycle rdquo said Nabeel Munir Deputy Permanent Representative of Pakistan to the United Nations and Vice President of the Economic and Social Council lt p gt lt p gt ldquo At the same time debt needs to be managed prudently rdquo said Munir lt p gt lt p gt There sentiments were echoed by Dian Triansyah Djani Permanent Representative of Indonesia to the United Nations and Chair of the Second Committee at the 71st session of the UN General Assembly lt p gt lt p gt ldquo I think most people in this room agree that sovereign borrowing is crucial in supporting government to finance investment particularly in this time to achieve sustainable development rdquo said lt p gt lt p gt ldquo At the same time however it is also equally important to manage the sovereign debts rdquo said Djani lt p gt lt p gt ldquo We have witnessed one too many instances in which the debt default of one country could put the growth of the global economy into a halt and hamper efforts to attain its development course rdquo lt p gt lt p gt However as Ambassador Llorenty noted in closing remarks lt p gt lt p gt ldquo Although the current scenario makes the effort of working towards a statutory framework for debt crisis resolution very relevant it is not feasible in the short term rdquo lt p gt lt p gt ldquo Nevertheless rdquo he said the current General Assembly process is a ldquo step in the right direction rdquo lt p gt