MEFMI Participates in UNCTAD Meetings on Debt Workout Mechanism & Responsible Lending and Borrowing

The United Nations Conference on Trade and Development (UNCTAD) convened the 4^th Meeting of the Working Group on Debt Workout Mechanism (DWM) on 7^th July 2014 at the New York University in the United States of America (USA). This was a follow up to the 3^rd Meeting which was held in Buenos Aires in March 2014. The meeting was attended by the panel of experts appointed by UNCTAD to develop a new, better structured, debt restructuring/workout mechanism by considering the feasible options and approaches to resolving sovereign debt problems. As a member of the panel of experts (Working Group on DWM) the MEFMI Director of the Debt Management Programme Mr Raphael Otieno attended the meeting. A few observers, mainly legal experts also attended. The objective of the Working Group meeting was to discuss the fourth and fifth elements of a possible DWM.  The working group had proposed 5 building blocks of an appropriate DWM. The meeting, therefore, dealt with the 4^th and 5^th elements which are embodied in the principles of legitimacy and impartiality.

In addition to the meeting on DWM UNCTAD convened another meeting on 8^th July 2014 to discuss proposed Guidelines for Implementation of the Principles for Responsible Sovereign Lending and Borrowing. The meeting also took place at New York University. The objective of this meeting was to discuss proposed guidelines for implementation of the UNCTAD Principles for Responsible Sovereign Lending and Borrowing.

The discussions at the meeting on DWM revolved around identifying the best ways of making the Debt Workout Mechanism legitimate and impartial. Based on the background papers produced for the meeting, participants were to review both procedural and substantive aspects of legitimacy and impartiality.

The proponents of DWM argue that more countries are facing debt crises and there is an urgent need for an international system of debt arbitration and restructuring. The thinking about a new DWM is based on the understanding that while instruments exist for addressing debt problems, questions still linger as to whether the current system is sufficient. For example, donor coordination in the debt problem resolution process remains an issue.

The discussions on the principles of impartiality and legitimacy in the context of a debt workout mechanism covered the importance of the principles of legitimacy and impartiality, and the practical roles of legitimacy and impartiality in overcoming existing debt crisis resolution challenges.

UNCTAD is expected to use the results of the discussions in coming up with a more concrete recommendation for a Debt Workout Mechanism.