by David Hillman/ Stampout Poverty and Eva Hanfstaengl/ SocDevJustice
After the recent report of the Intergovernmental Panel on Climate Change and other important dialogues by both Governments and NGOs it has become apparent that costs of Climate Change Adaptation and Mitigation will run into tens of billions of dollars each year. At present these costs threaten to swallow development budgets. Unprecedented choices now need to be made between, for example, protecting forests or building schools. Both are necessary - we must protect the environment and we have to develop the skills of future generations. Additional sources of finance derived from Innovative Instruments are a relatively recent phenomenon. They have been on the sidelines boosting ODA in certain strategic areas such as Immunisation and HIV/AIDS treatments. They now need to move to centre-stage. Years of research into various initiatives has set the scene for the introduction of powerful untapped income streams worth billions of dollars. With the new budgetary pressure of Climate Change, Innovative Finance Instruments need to be introduced. Additional budgetary demands require additional resources. Without them, how can the Sustainable Development Goals possibly be met?
Stamp Out Poverty campaigns for additional sources of finance to bridge the massive funding gap required to bring the world’s poorest people out of poverty. It is a network of more than 40 UK organisations, including Oxfam, Save the Children, Christian Aid and War on Want, pioneering initiatives such as UNITAID, which has already raised $1 billion for healthcare in developing countries. Additional, long-term finance is needed to pay for the millennium development goals to provide clean water, healthcare and education to the poorest parts of the world. A situation compounded by the financial crisis squeezing traditional aid budgets. Stamp Out Poverty is a leading member of the Robin Hood tax campaign.
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Initiative for Policy Dialogue input to GIZ conference on Sovereign Debt Management and Beyond – Identifying Policy Options to Prevent and Resolve Future Debt Crises, Berlin, June 27, 2011
By Barry Herman, Visiting Senior Fellow, Graduate Program in International Affairs, The New School, New York
A piece of the international financial architecture is missing, one that would facilitate more effective, fair and timely sovereign debt workouts than the ad hoc, inconsistent and sometimes highly political processes that are applied today. While a newly created mechanism should be available to any sovereign government, including in Europe, special concerns have been voiced, as in the convoking of this conference, for improving debt workouts in low and middle-income countries, where crisis-related declines in living standards that are part and parcel of sovereign debt crises are hardest to bear. The desirability of having such a mechanism was globally agreed by heads of state and their finance and foreign ministers at the Monterrey Summit on Financing for Development in 2002,2 and serious discussions about creating such a mechanism took place at the International Monetary Fund (IMF) in 2002-3, albeit without reaching agreement. It was not the first time that the matter was addressed internationally. Efforts were made to create international debt workout mechanisms in 1907 (Hague Convention), 1933 (Montevideo Pan American Conference), 1942 (early stages of Bretton Woods), 1978 (UNCTAD agreed guidelines), 1996 (HIPC for poorest countries), as well as the IMF initiative in 2002-3 (SDRM).3 If a permanent global instrument has not yet been created, can it still happen? Yes, global institutional changes do happen, albeit only when the conditions are ripe. This paper argues that launching an initiative at this time would be opportune.
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“The Resolution of Debt Crises: The Policy and Research Agenda”, was a one day seminar organized by UNCTAD and IPD, held February 11, 2011 at Columbia University in New York City. Social Justice in Global Development participated in this seminar.
Following this seminar, the UNCTAD has finalized a set of proposed principles intended to establish clear responsibilities for borrowers and lenders of sovereign debt.
The principles will be presented to governments at regional meetings to solicit their views and feedback and to build consensus on implementing an internationally agreed set of such principles in the future. Eventually, such principles could set a global standard for the contracting of sovereign debt, against which to assess the quality of contracts and the sustainability of debt.
See report of the seminar at http://www.unctad.info/en/Debt-Portal/News-Archive/Our-News/UNCTAD-Launches-Principles-on-Responsible-Sovereign-Lending-and-Borrowing-3052011/
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Geneva, 4 May 2011 - UNCTAD, after a careful consultation process, has finalized a set of proposed principles intended to establish clear responsibilities for borrowers and lenders of sovereign debt. Work on the proposed standards began at the height of the global financial and economic crisis in 2009, as the decade-long credit boom mutated into a sovereign debt crisis. The principles have the potential to reduce the prevalence of sovereign debt crises, maintain stable economic growth and support the achievement of the Millennium Development Goals. The principles will be presented to governments at regional meetings to solicit their views and feedback and to build consensus on implementing an internationally agreed set of such principles in the future. Eventually, such principles could set a global standard for the contracting of sovereign debt, against which to assess the quality of contracts and the sustainability of debt. The proposed principles and additional information on the UNCTAD initiative to promote responsible sovereign lending and borrowing may be found on the UNCTAD debt portal:
Download UNCTAD debt principles here or at http://www.unctad.org/en/docs//gdsddf2011misc1_en.pdf
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by Eva Hanfstaengl, SocDevJustice 2011
In 1997, the UN General Assembly adopted an Agenda for Development and decided that "Due consideration should be given to modalities for conducting an intergovernmental dialogue on financing of development”. Then, at the request of the developing countries, the United Nations started preparing a consultation process on how the commitments agreed at the major conferences of the 1990s were to be financed. In 1999 a very difficult debate began between South and North on a possible agenda for such an international conference. Whereas the North focussed their discussions on how to mobilise domestic and international resources for development, including foreign direct investment, the South preferred to talk about debt restructuring, ODA and trade policy. A sensitive area of discussion was the question of how to address systemic issues and structural implications involved in the international coordination of development initiatives, including a better global governance and financial architecture reform. The aim was to adopt a concrete and precise plan of action for the international community.
To keep up an effective FfD follow-up process it will be important for civil society worldwide, including in the South, to put pressure on governments to further implement the commitments made in Monterrey and at the second "International Conference on Financing for Development in Doha 2008” and at the UN Conference on the World Financial and Economic Crisis in 2009 in New York and continue debate on the recommendations made by the Committee of Experts to the GA President in 2009, chaired by Prof. Stiglitz).
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by Albert Gyan, Coordinator of the African Caucus 2002
At the Summit of Financing for Development in 2002 in Monterrey, representatives of 65 African Civil Society Organizations (African Caucus), who participated in the Financing for Development prozess since 1998, welcomed the initiative by the UN to reassert its role in social and economic development. They argued that it was high time that the Bretton Woods Institutions were reminded that they should not be accountable to themselves nor the G-7 countries, but to the global community, including the poor. In their view however, the path the Monterrey Consensus pursued was a “continuation of the old discredited neo-liberal model that has failed our people”. The core flaw of this path was its fundamental presumption that what development needs is more finance, and that the market can be relied upon to equitably distribute wealth and resources in a sustainable manner.
The African Caucus endorsed the overall aim of the New African Initiative which is a commitment by African leaders to place the continent on an accelerated path of social, technological and economic development. The Initiative is unique, in that it is an African driven, African owned and African led renewal and development program. As members of civil society, they commended their leaders for their courage and foresight. However, in its present form as the New Partnership, they cautioned the inherent dangers and protested the manner in which the programs have been pursued.
Read full statement >>>
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DESA Working Paper: Impact of the Economic Crises on Civil Society Organizations
A study by Eva Hanfstaengl 2010
The food, environmental and economic crises have challenged civil society organizations (CSOs) and the communities they serve. A broad-based survey, initiated by the United Nations Division for Social Policy and Development and guided by a Civil Society Steering Committee, was undertaken in 2009 that measured the impact of the crises on the operating capacity of CSOs around the world and their expectations as they look ahead. This study examines the current situation of CSOs as indicated by responses from 640 civil society organizations worldwide. It also asks what strategies they are undertaking to cope with a drop of revenues and how to strengthen social-service delivery capacities of CSOs during crisis periods.
JEL Classification: D710, Z00, F35
Full study under: www.un.org/esa/desa/papers/2010/wp97_2010.pdf
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in June 2009 adopted an Outcome Dokument on reform of global financial governance
by Eva Hanfstaengl
On June 26, in New York, the high-level United Nations Conference on the World Financial and Economic Crisis and its Impact on Development adopted unanimously an official "UN Outcome Document" that opens a door - even if only a small one - to a possible UN role in the reform of global financial governance. The preparations for the UN conference, however, were not without severe difficulties. The run-up to the conference highlighted sharp differences between Southern nations, which want to give the United Nations more say in tackling the financial crisis, and Western governments, who prefer to conduct their business within the Group of 20 (G-20) nations. Until now, global financial and monetary issues have been the responsibility of the International Monetary Fund and the Group of 8 (G-8), relying on the expertise of the Basel Committee on Banking Supervision (BCBS) and the Financial Stability Board, both of which include central banks and treasuries hailing largely from developed nations. However, with the present financial crisis having originated in the North and posing untold negative consequences for the South, political pressure has ramped up on the developed world to include other voices in mitigating this disaster. Impacts of the crisis, such as slowing growth rates, rising unemployment, and declining budgets are beginning to affect developing countries. Developing countries, including the poorest countries, therefore claim that everybody should have a stake in financial regulation. It is in this context that the demand for this global conference on reform of the financial system.
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by Eva Hanfstaengl
The UN needs to take further steps to truly establish a wider forum of experts to seriously tackle these problems. Therefore, we urge to strengthen the UN ”Committee of Experts on International Cooperation in Tax Matters”. There should be more members from the South and the agenda needs to be more representative of developing countries concern. In addition, there is a need to establish a political body or a tax authority to tackle harmful practices and violations of rules. We also urge governments to join the new international “Task Force on Combating Tax Havens and Capital Flight” set up by Norway. Governments around the world feel increasingly compelled to offer tax incentives to attract mobile capital. But the supposed benefits, in terms of job creation, rarely materialise while the costs to taxpayers are enormous. Severe tax competition amongst countries, increased avoidance and evasion taxes both by rich individuals and companies and a dramatic reduction in import tariffs have meant that tax revenues are being squeezed. This problem affects rich and poor countries alike, though the development costs in poor countries are likely to be much higher.
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by Eva Hanfstaengl
In the context Argentinean debt crisis in 2000-2001 and at the Financing for Development Conference 2002 the need for an international debt workout mechanism was discussedand in September 2005, the World Summit and General Assembly adopted the following paragraph on debt to consider significant debt relief or restructuring for low- and middle-income developing countries with an unsustainable debt burden that are not part of the Heavily Indebted Poor Countries Initiative, as well as the exploration of mechanisms to comprehensively address the debt problems of those countries. Such mechanisms may include debt for sustainable development swaps or multicreditor debt swap arrangements, as appropriate. These initiatives could include further efforts by the International Monetary Fund and the World Bank to develop the debt sustainability framework for low-income countries. This should be achieved in a fashion that does not detract from official development assistance resources, while maintaining the financial integrity of the multilateral financial institutions.
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by Juergen Kaiser and Eva Hanfstaengl
Between 1999 and 2005 substantial progress has been achieved in terms of debt relief for developing countries and emerging markets. Through a combination of partial debt relief and strong economic growth key indicators could be considerably reduced in several countries. In a few Non-HIPC countries individually designed debt relief also led to considerable improvements. During this process the international community failed, however, to develop debt management as such any further. A newly over-indebted developing country would in principle face today the same problems countries had after the crisis’ outbreak in 1982: there exists no comprehensive mechanism to reduce a country’s exposure to all its creditors in an orderly and pre-defined way. Neither the highly indebted poor countries initiative (HIPC) nor the multilateral debt relief initiative (MDRI) relief, nor the World Bank’s debt sustainability analysis (DSA), which still relates only to the poorest countries and thus to the limited scope of creditors who traditionally lend to them, has changed this dilemma.
At the same time the spectrum of creditors and the variety of instruments these creditors use, has considerably widened in the past years. Transition and emerging economies have become important lenders themselves. So have private investment funds and domestic lenders. New instruments include new types of bonds, the return of the classic syndicated loan from the money centre banks, as well as a new run by Export Credit Agencies. The International Financial Institutions (IFIs) have tried to bring lending decisions by the new creditors within the borrowing limits set under the Bank’s debt sustainability analysis (DSA). These efforts do not look promising, because they aim at unilaterally exerting pressure on the borrower, without providing much of an incentive for the creditor to forego an investment opportunity, which would eventually endanger the borrower’s long-term debt sustainability. In any event, the Bank does not calculate DSA guidelines for middle-income countries.
See paper here >>>
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by Eva Hanfstaengl
ActionAid/Oxfam and Eurodad recently examined European government approaches to aid, debt and trade. The findings were that far too little is being done by many governments. On debt relief, unfortunately; the HIPC Initiative has so far failed to reduce debt to sustainable levels in most countries where it is in place. Even those countries which have qualified for HIPC are paying $2.8 billion a year to their creditors, money which could instead go on development spending.
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