External shocks, including the Covid-19 pandemic, the war in Ukraine and climate change, have compounded the debt challenges facing many countries in the world. It is a critical moment now to address these challenges as the global debt surges and many countries are in debt distress. Lengthy and uncertain debt restructuring processes and the lack of progress in multilateral initiatives highlight the need for fundamental changes in the international debt architecture.

Addressing debt challenges is both vital and pressing. Timely and orderly debt crisis resolution is required to ensure that countries can commit their resources on sustainable development. Debt transparency from all parties is essential for preventing and resolving debt crises as it allows governments, creditors, and other stakeholders to make informed decisions about borrowing and lending. Debt sustainability assessments that integrate development goals are critical for the achievement of the 2030 Agenda.

The current initiatives of the international community to address challenges in these areas are insufficient and fragmented. Against this backdrop, UNCTAD is proposing a series of initiatives to reform the current international debt architecture.

Objective of the Project 

The long-term objective of the project is to assist developing countries in attaining long-term debt sustainability through an improved and more equitable debt crisis resolution system, enhanced debt transparency from all parties, and development-oriented debt sustainability assessment. This requires a sustained effort to mobilize political support. The aim of this project is to generate political and intellectual momentum for launching reforms that ensure fairness for both creditors and debtors.

Activities

UNCTAD will lead research efforts to support debt initiatives for sustainable development and stay engaged in discussions on all proposals at the national and international levels that are conducive to meaningful reforms for a more equitable debt architecture, taking into account the needs of both creditors and borrowers. The development and advancement of reform initiatives cover all three workstreams of the project, namely debt crisis resolution, enhanced debt transparency, and development-oriented debt sustainability assessment.

Regular meetings will be held with non-creditor countries, debt experts, and other stakeholders to promote knowledge and experience sharing, enhance borrower cooperation, and form an intergovernmental information exchange platform on debt matters. These discussions will identify research needs, propose practical solutions, develop reform initiatives, and build political momentum for their advancement. UNCTAD will further these efforts through workshops, publications, and engagement in global debt discussions to disseminate findings and promote reforms. The UNCTAD Principles on Promoting Responsible Sovereign Lending and Borrowing (PRSLB), published in 2012, set out the essential responsibilities of both lenders and borrowers of sovereign debt, representing a major advance in the area of soft law on sovereign debt crisis prevention and have been widely recognized as such in international and national levels. This project will channel efforts into revitalizing the principles to address current sovereign debt challenges.

Serving as a coordinating hub, UNCTAD will gather inputs from debt experts, market advisors, and CRAs to respond to borrowing countries’ needs in improving their practice of debt data disclosure. To promote debt transparency in the context of liquidity provision and lending landscape, UNCTAD will support the analysis and visualization of the global financial safety net. In terms of development-oriented debt sustainability, UNCTAD will produce analysis regarding debt sustainability that integrates development goals and empower policy makers in conducting their own debt sustainability assessment.

Intended Outcomes

Through this project, we aim to build political and intellectual momentum towards a network of non-creditor countries, increasing coordination and knowledge sharing between non-creditor countries. The PRSLB will be positioned as a vital resource to drive meaningful change in the current sovereign debt practice. Research-based policy briefs will be key in the project deliverables on various topics in the three workstreams of debt crisis resolution, debt transparency, and debt sustainability analysis. The research topics will be guided by the priorities of member states, including the role of credit ratings in development financing, debt sustainability analysis with integrated development goals, global financial safety net review, and legal tools to improve sovereign debt practice. This project involves visualization tools to disseminate the research findings and ensure better outreach of the research outcomes, which will also be disseminated in relevant international fora to offer insights in the political dialogue. Capacity building programmes are among the project outcomes, including responding to countries’ needs in improving their public data disclosure.

Link to the SDGs:

UNCTAD and relevant stakeholders are committed to contribute to the development of all SDGs and this project answers the principles and objectives of the 2030 agenda. It is mainly oriented towards progress for SDGs number:

• 17.1 Strengthen domestic resource mobilization, including through international support to developing countries, to improve domestic capacity for tax and other revenue collection.
• 17.3 Mobilize additional financial resources for developing countries from multiple sources.
• 17.4 Assist developing countries in attaining long-term debt sustainability through coordinated policies aimed at fostering debt financing, debt relief and debt restructuring, as appropriate, and address the external debt of highly indebted poor countries to reduce debt distress.
• 8: Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all.

• Documents