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Principles establishing clear ethical responsibilities for borrowers and lenders of sovereign debt have been proposed by the United Nations.
Work on the 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 UN Conference on Trade and Development (Unctad), which developed the principles, says the standards have the potential ‘to reduce the prevalence of sovereign debt crises, maintain stable economic growth and support the achievement of the Millennium Development Goals’.
One of the principles is that sovereign borrowers should be responsible ‘for conducting a thorough investigation into the financial, operational, civil, social, cultural and environmental implications’ of projects and their funding.
The principles will be presented to governments at regional meetings to solicit their views and feedback – and to try to build consensus
on how to implement them in the future.
Unctad hopes they will eventually set a global standard for the contracting of sovereign debt, against which to assess the quality of contracts and the sustainability of debt.
It adds that the encouragement of credit-led consumption in many countries and the subsequent debt crisis have given a ‘sense of urgency’ to its undertaking.
A UN General Assembly resolution in December emphasized the importance of developing such principles and encouraged member states, the Bretton Woods institutions, regional development banks and other relevant multilateral financial institutions ‘to pursue discussions to promote responsible sovereign lending and borrowing within the framework of the Unctad initiative’.
The principles result from lengthy and in-depth discussions with experts and stakeholders. Unctad established an expert group of prominent specialists in law, finance and economics, senior NGO representatives, the private sector and observers from multilateral financial institutions.
The work has been supported financially by the Norwegian government.
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