Poor countries call for debt moratorium

[Robert Weissman <rob@essential.org>]

> FINANCE: Developing Countries Call for
> Debt Moratorium 
> 
> GENEVA, Oct 12 (IPS) - The 135 developing countries of the Group of 77 
> (G-77) suggested
> Monday the declaration of a temporary moratorium on the servicing of their 

> foreign debts, to
> safeguard indebted nations against the global financial crisis. 
> 
> At a meeting of the UN Conference on Trade and Development (UNCTAD), the 
> G-77 declared that
> ''a temporary standstill on debt servicing could be in the interest of 
both 
> debtors and creditors.'' 
> 
> The idea, which echoed a similar UNCTAD proposal presented last August, 
drew 
> immediate criticism
> from representatives of the industrialised world. A delegate from Japan 
said 
> that some of the UNCTAD
> prescriptions, ''such as capital controls and unilateral debt standstill, 
> are presented without enough
> caution as to their side effects.'' 
> 
> But G-77 spokesman Javier Diaz Carmona, ambassador from Costa Rica, said 
the 
> initiative would
> provide a debtor country with ''the breathing space needed to design an 
> adjustment programme that is
> appropiate to its specific situation and to negotiate a debt 
reorganisation 
> plan. 
> 
> ''Other policy options could also be explored. This could restore market 
> confidence more quickly than
> a deep recession,'' he stressed. 
> 
> The final text outlining the G-77's recommendation was reached after 
lengthy 
> debate between the three
> groups of countries comprising the bloc: Latin America and the Caribbean, 
> Africa, and Asia. 
> 
> Only at the last minute did the African delegates withdraw their own 
> proposal suggesting the declaration
> of a unilateral and immediate debt moratorium, said diplomats. 
> 
> The unexpected debate on the possibility of a moratorium took place at the 

> opening session of
> UNCTAD's Trade and Development Board, which was discussing ''the 
> repercussions of the financial
> crisis on trade, investment and development.'' 
> 
> An UNCTAD study released in August assessed means available to developing 
> countries to defend
> themselves from speculative attacks by short-term capital. 
> 
> According to the UN agency, the introduction of insolvency procedures in 
the 
> case of attacks on
> currencies is a plausible alternative that would allow a suspension of 
debt 
> servicing for countries to
> defend themselves against predatory investors, and would give countries 
the 
> necessary breathing space
> to negotiate a debt reorganisation plan. 
> 
> The measures discussed in the August report would help prevent ''crises of 

> liquidity from turning into
> crises of insolvency,'' UNCTAD stated. 
> 
> The UN agency maintained that the legal basis for declaring a debt 
> moratorium could be found in article
> seven of the founding document of the International Monetary Fund (IMF). 
> 
> The decision of a moratorium can be taken unilaterally by a country 
> suffering attacks on its currency,
> and it would be up to an independent international body set up for that 
> purpose to evaluate whether
> such a decision was justified, said UNCTAD. 
> 
> The European Union anticipated its staunch rejection of any such 
moratorium 
> by criticising - through its
> representative from Austria - ''the provocative character of some of the 
> proposals.'' 
> 
> The Japanese delegate underlined that ''to us, the feasibility of some of 
> the proposals, such as the
> introduction of formal insolvency procedures over a national economy, 
seems 
> questionable.'' 
> 
> UNCTAD Secretary-General Rubens Ricupero pointed out that several of the 
> agency's forecasts had
> been borne out by developments in the international economy. The UN agency 

> began early last year to
> warn against the risks poised by excessive flows of capital on the 
> liberalised financial markets.
> (END/IPS/tra-so/pc/sw/98)