By Sophia Har
As debt restructuring looms for small islands and wealthy countries are embroiled in debt disputes, the International Monetary Fund (IMF) discusses aspects of a global bankruptcy regime at its Spring meetings. The IMF argues that debt restructuring is often "too little and too late," and released a series of papers over the last two years promoting aspects of global bankruptcy. Finance Ministers are considering staff suggestions from a 2014 IMF paper that would eliminate a "systemic exemption," which allows countries to get financing even when their debt needs to be restructured to reach sustainable levels.
"It's critical that we put countries on sustainable paths and not kick the can down the road," noted Eric LeCompte, executive director of the religious development organization Jubilee USA Network. LeCompte serves on expert working groups that are crafting a UN bankruptcy process. "Greece is one example of why we need to see these changes."
A May 2013 IMF paper focused on aspects of global bankruptcy that could be a road map to limit financial crisis, bring countries to sustainable debt levels and protect economies from predatory behavior. The United Nations General Assembly is currently working on a bankruptcy system that could become closer to US Chapter 11. Some of the world's chief financial jurisdiction countries are boycotting the process, including the United States, France, Germany, Japan and the United Kingdom.
"Something has got to change. There's global agreement that recurring debt problems are why inequality persists," said LeCompte. "The further we get away from the last global financial crisis, the closer we get to the next one."
Jubilee USA Network is an alliance of more than 75 US organizations and 400 faith communities working with 50 Jubilee global partners. Jubilee's mission is to build an economy that serves, protects and promotes the participation of the most vulnerable. Jubilee USA has won critical global financial reforms and more than $130 billion in debt relief to benefit the world's poorest people. www.jubileeusa.org