Odious debt
and responsible lending: World Bank hosts round table debate
The round table on 14 April 2008 was attended by
World Bank staff, African Development Bank staff, IMF staff, government
representatives, academics and civil society representatives. The discussion
aimed to respond to civil society groups’ demands that the Bank initiate
a more meaningful consultation process on the content of its recent discussion
paper, “Odious Debt: Some Considerations” published in September
2007. Many CSOs and academics believed that the Bank paper was one-sided and
missed many important arguments in support of the doctrines of odious and
illegitimate debt. In March, Eurodad published its formal response to the
paper.
The round table represented an important step forwards in CSOs’ efforts to engage stakeholders such as the World Bank in open debates on this issue. The strength of participation at the round table – including by representatives of many creditor governments – demonstrated that this issue is indeed an important one and is of interest to a wide range of stakeholders. The Bank expressed a general commitment to continue the dialogue on this issue – which is welcome – but shied away from more concrete actions it could take to further the debate at a technical and political level. These included CSO proposals for the Bank and a Southern CSO to jointly appoint an independent auditor to look in detail at a particular World Bank credit in order to assess its illegitimacy according to a series of jointly agreed indicators. CSOs’ also asked the Bank to make sure its discussion paper and the round-table outcome report were passed to Bank management and Board for formal discussion, however no commitment was secured. Nevertheless, the Bank will host a conference on the issue of low-income country debt in October 2008. CSOs will be invited to attend the event and the Bank expressed a willingness to continue these discussions at that forum. Eurodad will post details of the event as soon as they become available.
The round table tackled
technical legal issues, but also covered wider moral and political debates. The
specific experiences of Nigeria, Norway, Philippines and Haiti
were discussed. How to ensure responsible lending and borrowing in the future
was also debated. Although there was general agreement that there are clear
cases in the past of where loans have gone fundamentally wrong, there was less
consensus on how to tackle the problem.
Some of the proposals
presented by CSOs to address the problem of past mistakes included
comprehensive debt audits to assess the (il)legitimacy of individual credits,
fair and transparent arbitration procedures and a set of fair and equitable
rules for future loans. Many officials argued that the focus should instead
centre on ensuring responsible lending and borrowing behaviour in the future
given the complexities of the problem. Moreover, there were already a number of
international initiatives to deal with the problem of unsustainable debts such
as the Paris Club forum and the HIPC and MDRI Initiatives. These had cleared
substantial amounts of unsustainable – and in some cases questionable
– debt from the books of the poorest countries. Looking forward, the
Bank/Fund debt sustainability framework for low-income countries represented an
important tool to prevent future debt difficulties, it was argued. While very
few analysts would disagree with the imperative of preventing future rounds of illegitimate
debt, many CSOs could not accept that this approach as sufficient and argued
that it is currently the poorest countries who shoulder the burden of past
mistakes alone.
A number of legal academics
challenged the Bank’s discussion paper on odious debt and argued that the
Bank should have looked at the body of international law developed since the
Second World War and assessed the legitimacy of loans according to whether they
violated peremptory norms of general international law as agreed on by all
‘civilised’ nations (such as prohibition of genocide, torture
etc.). Instead, the Bank paper assessed whether case law supported the doctrine
of odious debt as proposed by Alexander Sack in 1927. Several academics
mentioned that they would be submitting a formal response on the World Bank
odious debt paper in the next couple of months. Eurodad will post details of
this response as soon as it is available in order to further discussions on
this critical topic.
In May, a more detailed
official outcome report of the session will be issued by Eurodad and the World
Bank. Eurodad would like to thank the organisers of the round table as well as
all participants for their important contributions to this evolving debate.
Eurodad hopes that this discussion represents the first of a series of open and
frank debates on this issue between officials and CSOs.
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