Analysing Sovereign Debt Contraction and Management
- International Lawyers Project
- Dec 15, 2024
- 2 min read
Situation
At sustainable levels, sovereign debt can supplement revenues raised though taxation and contribute to the provision of public services and the development of infrastructure and growth. However, at unsustainable levels, debt can cripple economies when revenues raised are used to repay debt. Increasingly, developing countries have been pushed into debt distress which has meant that those jurisdictions are unable to service their debt obligations as they fall due. This has significant implications such as increased poverty and reduced long term growth. Given that the number of countries in debt distress or at a high risk of debt distress has increased following the COVID-19 pandemic, increased fuel prices and the war in Ukraine, there is a need to understand the legal and regulatory framework surrounding sovereign debt contraction and management.
ILP’s Action
ILP worked with our partner AFRODAD, the African Network on Debt and Development, to conduct two case studies on debt contraction and management in Malawi and Ethiopia. These studies highlighted the gaps in the legislative and regulatory framework and evaluated the enforcement of existing safeguards. The studies were conducted in collaboration with civil society organisations based in the case study countries. The studies were then validated in both Ethiopia and Malawi with treasury officials, members of the legislative arm of government, academia and civil society, who gave input on current practices. The findings of the studies and general recommendations were also presented during local advocacy sessions, attended by treasury officials, representatives from the legislature, civil society organisations, legal professionals, policy makers and academics, and at the 2024 African Conference on Debt and Development. These sessions aimed to create awareness, to educate relevant stakeholders, and to persuade decision makers to adopt sound debt contracting and management practices.
Impact
The studies have built the capacity of those involved in the contraction and management of sovereign debt by helping them to understand the gaps in their legal, regulatory and institutional frameworks. The studies have also helped civil society to identify advocacy entry points in calling for sound debt contraction and management practices, including seeking transparency, accountability and public participation. The Malawi Economic Justice Network for example requested a copy of the Malawi study to inform their engagement with the Malawi Debt and Aid Management Division under the Ministry of Finance.