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Mr. Chairman,
We would like to thank the Secretary-General for his report entitled
“External debt crises and development".
Mr. Chairman,
According to Secretary-General’s report, the total external debt of the
developing countries at the end of 2001 was estimated at close to 2.5 trillion
dollars or 38.2 per cent of their gross national income. The same figure at the
end of 1996 was 1.8 trillion dollars. The amount as well as the increase in the
figures is astronomical.
4. The combination of extreme poverty and extreme indebtedness has plunged a
large number of low income countries into a desperate downward spiral.
Governments have no chance of meeting the social needs of their people when they
are forced to spend more than half of their budgets on debt servicing. The 712
million people who live in more than 40 countries known as "Highly Indebted Poor
Countries (HIPC)", have no prospects of improving their economic and social
situation. For these countries, even full use of traditional mechanisms of
rescheduling and debt reduction may not be sufficient to attain sustainable
development.
5. Over the last few years, a number of initiatives have been undertaken to give
some relief to the debt ridden countries including the HIPC initiative. was
launched in 1996 to provide debt relief to some 40 highly indebted poor
countries, mostly from Africa. But HIPC covers only a fraction of the
unsustainable debt of the developing countries. Secondly, it requires the
potential beneficiary countries to go through a long list of difficult
conditionalities before it is made eligible for relief. The Secretary General’s
report states that in 1999, the number of conditions attached to 13 HIPCs
averaged 110 per country, of which 77 were governance related. Resultantly, the
relief provided under this initiative has been too little and too small. After
six years of its launching, only 18 countries of the 33 have attained the
“decision point”, and of this number only 4 were able to reach the”completion
point”.
We do believe that the domestic governance, and policy reforms are important for
attaining economic growth and development but development can not be conditioned
to ransom. As long as the debt relief is tied to structural adjustment, the goal
of releasing resources for development will remain out of reach.
7. The Secretary-General's report and the report by the United Nations Executive
Committee on Economic and Social Affairs have made some good proposals for
effective debt relief to HIPC, especially the proposals to apply less
restrictive eligibility criteria and explore more sources of funding for "real"
relief package. The developed countries and relevant organizations must consider
these proposals seriously.
Mr. Chairman,
8. We would also like to point out that a number of middle income developing
countries are also confronted with serious external debt problems. The social
impact of external debt in the middle income developing countries is serious and
wide spread. This leads to deterioration of living standards, social disorder
and eventually political instability. A large number of middle income developing
countries' debt/GDP ratio is extremely high. For instance, Pakistan's debt/GNP
ratio is 58 per cent and debt/exports ratio is 203 per cent. Out of every 100
dollars that we earn through exports, 36 are lost to debt servicing. The debt
servicing/government revenues ratio is to the tune of 31.5 per cent.
9. The debt sustainability of middle-income developing countries is not only
essential to their economic growth but also to the smooth functioning of the
world economy. It became evident during the Latin American debt crisis in 1980s
that the debt sustainability of the middle income developing countries has major
impact on the world's economy. Considering the current debt burden of a large
number of middle income developing countries, the possibility of a similar
crisis hitting the international community cannot be ruled out.
10. In his report, the Secretary-General has recognized that the international
financial system lacks a coherent and realistic international strategy to deal
with financial instability and the debt sustainability of developing countries.
This was also recognized by the International Conference on Financing for
Development. The “Monterrey Consensus” had therefore underlined the need to put
in place a set of clear principles that could ensure fair burden sharing between
the creditors and the debtors. The middle income countries need major reductions
in their debt obligations to stave off defaults and their consequences.
Mr. Chairman,
13. By any objective economic analysis Pakistan is a "Highly Indebted Developing
Country". We strongly believe that outright debt reduction is the only effective
way to address the external debt problem of the middle income developing
countries, particularly countries which are in a situation similar to Pakistan.
Mr. Chairman,
14. Debt repayment is increasing absolute poverty in poor countries. Vast sums
of money, which can help raise the peoples' quality of life through education,
health care and employment are being diverted to meet crippling repayments to
Western financial institutions. Last year alone, developing countries paid 270
billion dollars in debt service. This means 60 dollars for every man, woman and
child. In fact for every one dollar given in aid, the industrialized countries
received 9 dollars back in debt service. This is one of the greatest injustices
of our time.
15. The world's richest nations appear to believe that they can continue basking
in prosperity while indebted countries hover on the brink of collapse. If they
do, it would seem that they are not mindful of their own long term interests.
The inhabitants of impoverished countries will not accept exploitation of their
resources for ever.
16. The developed countries must review their policies for debt relief. They
must take immediate action to provide a global, comprehensive and durable
solution to the external debt problems of all developing countries. With the
current debt sustainability level and slow action by the International Financial
Institutions, a debt crisis is indeed looming on the horizon.
17. We firmly believe that the United Nations should have a key role in evolving
and implementing a comprehensive debt relief programme. The United Nations, the
only universal democratic organization has the capacity to take such initiatives
and to make them a process.
I thank you, Mr. Chairman.