Who’s Afraid of a Fair Debt Architecture?

The fourth Financing for Development Conference officially kicked off in Seville this Monday, as world leaders gathered with broad smiles to congratulate one another for the good work already achieved. That work was the FfD4 outcome document, which had been agreed upon by most UN member states—excluding the US, notably—in advance of the meeting. Known as the “Compromiso de Sevilla,” which translates as the “Sevilla Commitment,” the document could more accurately be described as the “compromise of Seville.” Though many member states had pushed for commitments to ambitious, structural reforms, the final revised text saw these either removed or diluted—often due to the policy priorities of global North governments. The section on sovereign debt is no exception.

Expectations

Amid a full-blown debt crisis that even the IMF acknowledges as a derailment of sustainable development goals, there were high hopes for FfD4 to deliver on debt reform. Long-pursued proposals for a new multilateral legal framework addressing debt resolution and crisis prevention made it into the initial drafts of the outcome document. Small Island Developing States, the Africa Group, and countries like Cuba, Brazil, and Pakistan defended the need for such reform in order to overcome dysfunctional and creditor-dominated decision-making on sovereign-debt issues.

Civil society groups pushed for a UN Framework Convention on Sovereign Debt. Discussed and agreed on by all member states, the framework would encompass a global consensus on the rules, principles, and structures of the various stages of the debt cycle. The long overdue establishment of a multilateral sovereign debt resolution mechanism would be one of the main elements of this convention. But it would also deal with rules and tools for responsible lending and borrowing, debt transparency, and other elements of debt management in order to prevent future crises.

For months, however, the proposal met fierce opposition from most creditor countries, Europeans in particular. The EU, the UK, and Switzerland, as well as Japan, Canada, South Korea, and Saudi Arabia, all strongly opposed the idea of an intergovernmental UN group to discuss and agree on reforms to the global debt architecture. China insisted on leaving debt to the non-inclusive G20 forums. As borrowing countries kept pushing for an agreement on starting a UN process to discuss gaps in the debt architecture, with a view toward establishing a debt convention, the co-facilitators of the process ended up proposing a diluted compromise text. The final agreement includes an intergovernmental process, but with only the purpose of “making recommendations” (paragraph 50f). This last-minute addition dramatically weakens the Compromiso.

In other areas there have been similar outcomes. Instead of an agreement on binding responsible lending and borrowing rules, a working group to be co-convened by the UN Secretary General, the IMF, and the World Bank (as if these last two had a track record of responsible lending themselves) was established. Instead of an independent, open and binding debt registry, the Compromiso urges the consolidation of existing debt databases at the World Bank, while “respecting privacy and data protection.” Instead of a push for a multilateral debt resolution mechanism, the document encourages the G20 to improve the Common Framework.

In the end, instead of a commitment to redress the imbalances of a creditor-dominated system, the outcome is a weak mandate that some want to limit further to an annual discussion in New York. All in all, it protects the status quo and leaves borrowers outside of the decision-making process. At a time when one of the worst debt crises the world has ever seen is suffocating public budgets, threatening the entire Sustainable Development Goals agenda, and preventing action on the climate crisis, those suffering the worst impacts will continue to have no say in the future. And as the saying goes, “if you don’t have a seat on the table, you’re on the menu.”

What now?

The question of debt is central to the present and future prospects of global South countries, particularly in Africa, so the fight is not over. More side events have been devoted to the issue of sovereign debt than to any other at Seville. There are several things to keep an eye on, both at Seville and in the following months and years:

+ False solutions: This week we can expect the announcement of the “Sevilla Platform for Action” (SPA), an initiative by the Spanish government to set up coalitions of the willing to support various initiatives, including the “Global Hub for Debt Swaps for Development.” Debt swaps, also included in the outcome document, are often presented as a win-win solution, addressing debt within the context of fiscal constraint. But debt swaps are no silver bullet. They are neither efficient enough to create sufficient fiscal space, nor can they adequately address debt sustainability problems.

+ Borrowers club: Both the outcome document and the SPA initiative include proposals to support further coordination amongst borrowing countries. UNCTAD is hosting a proposal on a Borrowers’ Forum and the “Compromiso de Sevilla” agrees to “establish a platform for borrower countries with support from existing institutions, and a UN entity serving as its secretariat.” Increased coordination among borrowers is good news; the international financial architecture has long been dominated by creditors who coordinate through the Paris Club and the G20. The proposal states that the platform could focus on discussing technical issues, sharing information and experiences in addressing debt challenges, increasing access to technical assistance and capacity-building in debt management, coordinating approaches, and strengthening borrower countries’ voices in the global debt architecture. It’s a positive proposal; whether it will be fully funded and operationalized is another question.

+ Corrupt debt: The “Compromiso de Sevilla” includes the commitment to curb corrupt borrowing and lending including by utilizing the UN Convention Against Corruption (UNCAC) to “explore options to make such contracts unenforceable.” This is a win, albeit a minor one. The aim is to ensure that lenders engaging in corrupt deals which produce indebtedness cannot enforce payment. The next UNCAC Conference of State Parties will take place in Doha in December, which will be an opportunity to push for this to become a reality.

+ UN Debt Convention: A UN Debt Convention is sorely needed, as is a UN Tax Convention. The latter was rejected at Addis Ababa in 2015, but it is today under negotiation at the UN General Assembly. A similar process could take place with the Debt Convention. The discussions at the UN 2nd Committee and General Assembly may be a faster option than the agreed intergovernmental process to discuss debt architecture. In any case, civil society will continue working for this, and will be supporting those borrowing countries that want to see a fairer and more equitable debt architecture in place.

+ A global debt movement: Twenty-five years ago there was a massive mobilization for debt justice, and we won extensive debt cancellation. 2025 is again a Jubilee year, and civil-society organizations, faith groups, and social movements around the world are coordinating to fight for unconditional debt cancellation and systemic reform. Petitions are being signed across the world calling for debt justice. For now, as the debt crisis rolls on amid deepening global austerity, billions of people’s lives depend on fighting for, and winning, debt justice.