Press conference UNCTAD: Developing countries crippled by debt need urgent relief, stresses UN trade agency

Good afternoon.

It's nice to be connected with you all today.

Ontan analysis will.

Zoom will zoom on the.

The debt aspect of the.

Plan Ontan presented on 30th of March.

It's also a reaction to.

The decision announced at the IMF and World Bank meeting spring meeting last week.

And for more.

Details.

I'll now give immediately the floor to Richard Cole.

Wright, senior economist and.

Director at Ontad and Stephanie Blankenberg will also give you.

Some more details on the.

All aspect of the date, the date plan that is proposed today.

Richard, do you have the floor?

Thank you, Catherine, and good afternoon to everybody.

This is my this is my first attempt at a virtual press conference, so virgin territory, so to speak.

Let me briefly go through the argument and then and then if Stephanie wants to present after say something after me, I'll, I'll see, I'll see to her.

The first of all, just in context, let's just put this into context.

We've got to remember and we put the numbers in the report, debt to developing countries since the 09 crisis has been surging.

It's, it's, it's essentially doubled in the nine in the nine years between 2009 and 2018 when, when we have the last comprehensive data.

It took 30 years before that for the debt to GDP ratio to double in developing countries.

So a huge surge since the crisis, mainly private, but some government but mainly private debt.

Again, the, the, the, the, the numbers are in the, in the report And outside of the least developed countries, most of the creditors have been private creditors, including a lot of new types of creditors that we classify as in the world of shadow banking.

And of course much of the borrowing has been in dollars or in other reserve currencies.

Now servicing on average the servicing of the debts accumulated in this as as amounted to on average 10% of government revenues in developing countries.

But there are many countries where servicing accounts for 20% of government revenues or more.

Now again, we have a little figure in the in the report that indicates who some of those countries are.

Just to put that in context, there are 64 low income countries as classified by the IMF, 64 that are spending more on debt servicing than on health services.

And at the end of last year, again according to the IMF, 7 developing countries were in default and 27 were what they called distressed or highly distressed countries.

So there was a problem already brewing in the developing world.

As you all know, the global context since COVID-19 hit has deteriorated very, very rapidly.

If we take just the World Economic Outlook forecast, it's three negative 3% for the world this year, much more pessimistic than we even had back in the first report we put out in early March, and we were called pessimistic back in in early March.

Putting that into numbers, that's a $5 trillion hit to the world economy in terms of where we should have been if the IMF growth project projections had been correct at the end of 2019, they were predicting something like a 3% growth rate then.

So $5 trillion has disappeared, if you like, as a consequence of this crisis.

Assuming that the world economy contracts by 3% and as the IMF points out, there are worst case scenarios than a contraction of 3% begs the question that I just throw out there.

If we're losing 85 trillion, what's happening to the $8 trillion that the G20 countries have put together as responses to this, this crisis?

And that's an interesting question.

One place it's not going to is developing countries.

That's, that's, that's quite clear.

Developing countries are facing a massive financial squeeze as a consequence of the of the global recession.

And that squeeze comes through many avenues.

Portfolio outflows are, are, are are collapsing just taking the IIF figures for debt and equity flows.

And it's a subset of developing countries.

It's not all developing countries, but and if you take out China and South Korea, which we tend to do in our data, $75 billion in the subset of developing countries under that data set have left those economies since the beginning of of this year up till mid-april.

FDI is falling.

We don't have numbers, but our colleagues in the investment division have estimated anything between a 2530% drop in FDI.

Remittances are collapsing.

The World Bank has just put out an estimate of $100 billion in the drop of remittances to developing countries this year.

And spreads are on on borrowing are increasing significantly, which means that rolling over debt is going to be very expensive if developing countries can do it over the course of the year.

And there's on top of those financial squeezes, there are trade squeezes.

As you all know, commodity prices are collapsing.

We've entered A bizarre world where oil prices turn earlier this week, tourist revenues have collapsed for many countries and supply chains are broken.

So trade is the, the, the hit on the trade side is, is very significant.

And currency, many emerging market currencies have declined, declined massively against the dollar point that we made in our in our last report.

And there's not been any easing up.

So we're talking about a massive financing gap, huge redempt debt redemptions in 2021 in the around $2 trillion plus.

Again, we have the numbers in the in the report.

This is a world in other words, where defaults by developing countries on their debt is inevitable.

This is a further default beyond the seven that are already were already classified as in default last year.

This is inevitable.

And so this is a, a, a hugely troubling, indeed frightening situation for many developing countries.

And so the question is, what happened in Washington at the virtual spring meetings where the talk was coming together, International solidarity, not leaving anybody behind in the face of a economic shock which has nothing to do with the developing countries themselves, indeed the developed countries too, and completely exogenous shock.

And the answer is something happened, I guess we would say.

I mean, the IMF cancelled $214 million of the 25 poorest countries.

And we you shouldn't dismiss that because that's money that could be spent on dealing with the health pandemic, which is yet to hit most developing countries.

The economic hit in the developing world has preceded the economic hit.

So the fact that there is some more money available, I think is a should be taken as a positive step.

But it's it's around $200 million was the figure.

The the larger numbers that the G20 are suspended bilateral servicing until the end of the year.

But it's a suspension, It's not, it's not a cancellation of debt.

The countries have to repay that from 2022 onwards and they have to repay it with interest.

So it's kicking the can down the road.

The estimates of what what is being kicked down the road depend on which creditors participate.

The bilateral figure for bilateral creditors seems to be in the range of around $20 billion That will be suspended until the end of the year.

If the private creditors and multilaterals joined in, that figure could rise to something like 40 billion.

But it's suspension, it's extend and pretend.

Essentially it's what Barrelfac is called extend and pretend.

You extend the the problem and you pretend that it's going to go away in two or three years time if growth picks up in the world economy.

We don't think this is credible.

We don't think it's a process that has worked in the past, and we don't think the existing way of handling sovereign debt can handle the kind of problems that we see emerging now in the developing countries as a consequence of the COVID-19 crisis.

So what we are arguing for is a global debt deal for the developing countries.

And that comes in essentially 3, three steps.

A temp, a temporary standstill needs to be put in place as soon as possible and for as long as it takes.

If, if the if the advanced economies can say we are going to do whatever it takes to mitigate the effects of this crisis, then it should be the case that the, the debt is, the debt payments are, are, are are temporarily stopped for as long as it takes the countries to get themselves back on their feet and undertake the necessary debt relief and restructuring programmes, which is the second step that needs to take place.

We need to see significant debt relief and restructuring in the face of this, of this shock.

Who should be involved in that restructuring?

All creditors we think should be involved, not just bilateral, not just multilateral, not just private creditors, but all creditors should be involved.

How should that be done?

We, we outline, we outline in the report as some basic principles of how you would go about undertaking a debt restructuring work that we've done in the past in UNCTAD on the principles of responsible borrowing and lending principles on debt restructuring.

We also look at the recent Argentinian case where the government there has also outlined some principles that it is following in in its own efforts at restructuring the mountain of debt that it is suffering under how much debt?

This is obviously spec.

It's very difficult to make a judgement.

We, we, we suggested in the paper last that that we launched a couple of weeks ago a $1 trillion debt cancellation for developing countries.

That was based on a figure that we took from the German debt cancellation at the end of the Second World War, where half of German debt was cancelled in the London conference of 1953.

So if you apply that as a as a measure of international solidarity on the debt front, 50% cancellation would translate into something like a trillion dollars for for developing countries.

Who, where should this where should this effort at restructuring take place?

Again, we go back to an old argument in untad that we need an independent body to be established to take, to undertake that kind of activity.

It can't be the IMF or the World Bank, because the IMF and the World Bank are themselves creditors.

You can't put the fox in charge of the hen Hut.

So we need a genuinely independent institution drawing on outside expertise from the markets, academics, indeed possibly from from the institutions themselves.

Because there's no doubt that the IMF certainly has a very strong cadre of, of, of officials who have been working on debt problems.

But the point is it should be an independent body.

Interesting lessons for that are of course the interwar.

The the Bank for International Settlements was set up in 1930, established by an intergovernmental agreement to manage German debt.

Didn't do very much because the Hoover government in in in the early 1930s first of all imposed a moratorium on German reparations and then cancelled all reparations from Germany down the road here in the Lausanne conference in 1932.

So that we have to look hard at the kind of institutional arrangements, but then the importance of independence should not be compromised.

Last point, really this is not a charity exercise doing undertaking this kind of exercise is in in the interests of the advanced economies themselves, developing countries, given that the health pandemic will will eventually hit the much of the South if there's a blowback if if that happens, there will be a blowback in terms of health to countries that thought that they had somehow conquered this virus.

That's almost inevitable if the if it spreads across the developing world and the recovery in the advanced economies needs to take place with growth and trade and investment opportunities across across the world economy, including the developing world.

So advanced economies have an interest in a strong recovery in the South and that will only take place if we deal effectively with the debt overhang that now is is threatening much of the developing world.

Stephanie, I don't know if you want to say anything.

On some of the expert aspects that you mentioned, the the broader framework within the, the, the focus on in particular debt overhangs, problematic debt situations in developing countries should be considered is that they are facing a layer of vicious cycles over and above the immediate shock from the COVID-19 crisis, but also in their ability to respond to those.

On the one hand, it should be kept in mind, as we're saying in the report as well, that developing countries are not in the same position as advanced countries to flatten even the contagion curve of the epidemic.

With about informal employment making up between 50 to 90% of all employment in most developing countries, effective lockdowns are not an option without essentially running the risk of more people dying from starvation than from actual illness.

This also means that the financial requirements or the the the the capacity to mobilise economic resources to respond to the pandemic itself is much higher relative to their size of economies than it is in fact in advanced economies who themselves are struggling despite the 8 trillion they're about to mobilise in stimulus.

Second layer of this kind of vicious circle is precisely that developing countries do not have or do only have very limited possibilities to mobilise own financial resources in the same way that advanced countries can.

They are dependent on hard currency, as we say in the report, for many economic transactions, but essentially to be brief, in particular in terms of imports and precisely servicing their debt, their debt obligations.

But they cannot Simply put on their own monetary printing machines in the way that developing countries can without vague very quickly and in particular in a situation such as now risking financial meltdown through heavy depreciations, an increase immediately in the value of their foreign debt through those depreciations and inflationary pressures in their economies.

So there are two, there are two layers, both at the pandemic level as well as the possibilities of financial owned financial response and, and, and financial resource mobilisation in this.

Now, why the focus on debt in particular?

The, the, the, the point here is that existing debt overings external and in particular foreign currency denominated, but not only those debt overhangs are the essential roadblock to achieving a fast and internationally coordinated response to the situation.

As which it has pointed out, unless there's very drastic action on this front, it blocks everything else and could result in serious or in defaults that in turn will vary irreversibly result in in long term financial and economic crisis in these economies long beyond way beyond the COVID-19 crisis itself.

Now to characterise the response that we have so far in, in, in the international community and, and underlining that both the debt cancellation of the 200 mentioned 214 million by the IMF as well as the initiative to suspend to be said for now debt repayments by around 73 mostly poor developing economies to bilateral creditors only as as as of now are welcome.

They do provide some breathing space, but it's a little like thinking about that response sort of equals a situation that we're all familiar with, with which is that if you want to get support from your bank, be it through new loans or be it through refinancing possibilities, let alone forgiveness of past indebtedness, you've got to be rich already.

The equivalent of this at the international level currently is that the response is almost uniquely with the exception of those two initiatives focused on new lending even at concessional terms.

But what is being on offer for developing countries, never mind the 8 trillion be mobilised in the context of advanced country needs.

What is on offer is to say, well, we'll, we'll, we'll help you out for now with new lending, new debt at relatively concessional terms.

But that only also applies very largely to those who are already strong or the equivalent of what I mentioned, which IE who have what in international Parliament is referred to as strong fundamentals.

So if you're already in dire trouble, even that survival line is not necessarily open to you.

That in turn, of course, is an entirely insufficient response.

And is likely to to precipitate downward, downward spirals.

This is why we're focusing on the urgent need for action on the debt front right now.

Now, I don't have to go into more detail.

We can do this in question and answers as to the logic of the precise proposal.

As Richard has already explained, the first thing that is needed is breathing space by unconditional suspension of debt repayments to all creditors on request of any developing country that requires such such forbearance and for sufficiently long time period to address not only immediate needs in terms of of liquidity, but to allow developing countries to regain a sustainable path for their future debt.

Now this is where the breathing space required is not just for immediate fiscal responses or fiscal breathing space, but for breathing space to resolve what are unproductive, speculative and largely damaging debt overhangs to developing countries for the longer term.

That breathing space should then be used not only for immediate COVID-19 response, but it should be used precisely for a case by case exercise of long term debt sustainability assessments that have to take account of what is required for developing countries to regain sustainable growth pass and consistent sustainable fiscal and external trade balance trajectories.

From AUN perspective, that should also include additional investment requirements that arise from Agenda 2030 and the SDGS that should not just be suddenly swept under the carpet.

And this is of course work that Antet was engaged with prior to the COVID-19 crisis.

Now this in turn, in our view, is something that cannot happen any longer through the kind of fragmented for that have governed resolutions of sovereign debt restructurings in the past.

It has to be done, given the scale and the scope of this problem that has now become apparent in developing countries in a forum.

And what we suggest via a new global developing country debt authority that develops the these these debt sustainability assessments and therefore determines the size of ultimately debt relief, haircuts, cancellations required in a in a coherent, coordinated and transparent fashion.

And in particular, characteristic of these debt sustainability assessments would have to be that the main objective is not simply returning developing countries as fast as possible to some kind of ability to continue to service existing debt obligations.

But precisely as I said before, to return them on a sustainable path for debt that takes account of their inclusive, productive, sustainable development strategies in the longer run.

It has to be in this forum.

Of course, there has to be, there will have to be developed criteria how any kind of burden that arises from this kind of debt restructuring possible.

Haircuts and debt cancellations are fairly distributed between creditors and debtors, but this is of course also an exercise that should take into consideration past not only borrowing behaviour but also lending behaviour as far as as as lending into already vulnerable developing countries was concerned.

So that does require in the end breaking with some taboos, putting upfront, as Richard said, not charity towards developing countries, but self interested solidarity with developing countries.

Putting this upfront and breaking with Sanchez also in our view requires getting over a hood of finding ways for for for international mechanisms, starting in particular with developing countries themselves to provide space efficient space, transparent space to come to to a collective solution on this.

Thank you.

Thank you very much, Stephanie.

Now the.

Floor is open, I have.

Already two question on my list please.

You know that you can.

Raise your E Raise your hand on the right hand.

Side, bottom right hand side of your screen, Antonio.

Brotto FA Agency, Spanish agency.

You have the floor.

Thank you.

Good afternoon.

A very short question.

Can you please repeat how many countries are in danger of declared default developing countries and can you give us some examples?

Thank you.

Richard, Richard.

Stephanie.

Yeah.

I mean in terms of declared divorces is, is an ambiguous concept because there are international assessments of where a country enters a situation of insolvent insolvency and there are also situations where default has been officially declared.

But in terms of developing countries that are in a situation whether declared or not of default, we have, we had eight, one official list that we have is the IMF's list of low income developing countries that are also eligible for the poverty reduction and growth growth trust of the of the IMF and that undergo regular debt sustainability assessments by the Fund.

In this case, there's 69 countries in that meet these criteria on this list.

And of these as of end November 2019, nine were declared in in default, most of them small poor sub African economies.

One of them for example is is that was on the list is Somalia.

But Somalia has very recently agreed debt relief of 1.4 billion with its bilateral Paris Club creditors as of March 2020.

That agreement stems from before the COVID crisis.

So there are now 8 left.

There are further 10 on this list, most of which again are sub-saharan economies that are considered as being in **** debt distress, IE approaching either informally or or or or or well not informally in a not yet declared way, a situation of insolvency rather than illiquidity.

Again of the overall 24 countries out of 69 on this particular list, there is 2/3 are in in sub-saharan African economies that is of end November 2019.

And of course while it can be difficult to follow exact data on this over the past months and that thing is likely to have to have increased.

In addition, of course we have a large number of middle income countries and higher income countries that are in some kind that that int trouble.

I I mentioned here only obviously Lebanon that defaulted on 10 March on on part of its external debt obligations.

Argentina has not yet defaulted.

But anybody following this case of course knows that is perilously close to default, certainly facing anything that anybody would consider a debt crisis.

Similarly, many middle income countries in sub-Saharan Africa are under enormous financial pressures, The Gambia, for example, Nigeria to mention just a few.

And in in the Asia Pacific region, of course, a country that springs to mind immediately is Pakistan.

There are also smaller East Asian economies such as Laos and so on and so on that are facing at the real East very **** pressures of debt and financial distress.

Thank you.

I have now on my list Laurent Sierra, Swiss News.

Agency.

You have the floor, Laurent.

Thank you, Catherine.

Hi, everyone.

Richard, you tended to say that that call for an independent body is not, we need a new call And and that has been something that Ant that has, has has called for for quite a long time.

I was wondering whether there were recently you, you're aware of consultations among countries around that recently and and how do you see the debate changing within the framework of the crisis?

I of course, the International Monetary Fund moved in that direction in in the early 2000s, there was an attempt by the fund to launch some kind of sovereign debt workout mechanism.

And Kruger was I guess the the chief economist at that point or the vice President.

So and that was, but it didn't go very far largely because the US very quickly opposed that initiative.

But that was a serious attempt by the IMF in the early 2000s to move in that direction.

I think it's, I think, I think the discussion has since moved in a slightly different direction to try and reinforce what they call market friendly solutions by strengthening bond, bond contracts to make it more difficult for vulture funds and non non cooperative lenders to engage in some sort of collective restructuring.

So there's been a lot of effort to move in that direction, which is welcome of course, but we don't think it's sufficient to deal with that.

Recently, a group of 24 foreign ministers from developing countries and developed countries made a strong call not to, to, to, to grasp the problem of sovereign debt restructuring and, and, and move towards some kind of, at least at least it's implied, some kind of restructuring framework.

So I think, I think the conversation is coming back on the need for something other than the arrangements we have now.

As Stephanie said, the every everyone seems to understand, I think a couple of things about current arrangements.

They tend to do too little too late.

So many countries that actually go through a debt restructuring often find themselves having to go through another restructuring within a few years.

And then you've got classic cases like Jamaica who have been under kind of some kind of restructuring arrangement for 30 years or more without solving the debt problem.

So, so that problem of recurrent restructuring is a feature of the current arrangements because of this, too little doing too little too late.

And the other feature, which I think is particularly problematic for developing countries is that there's a very strong bias towards the creditor, particularly as, as private solutions become the preferred option, there's a bias and, and, and, and, and creditors do shopping around the world for jurisdictions that are more favourable to them, which is certainly true of a lot of American courts where, where bonds being issued in, in, in the US, in New York or wherever else and the UK tend to have a creditor bias.

And so that's, that's again, a very, a very pronounced weakness in the system.

So, so I think, I think now is a moment when, when, when, when the discussion of the institutional arrangements is coming back.

And we as we argue in the paper, the the Argentinian experience where a lot of the bonds actually have got improved contractual arrangements in them is, is raising these issues I think.

And we think to to to a much higher level than we have seen in in recent years.

Thank you, I now have.

Xin from Xinhua.

Over to you, Xin.

Hello, Xin from Xinhua.

Good afternoon, I.

Have two questions actually first.

Why you mentioned in the?

Report that the debt.

Cancellation announced by the IMF.

And the.

Suspension of debt payments.

By the G20 leaders.

You estimated that the.

Call for international solidarity have so.

Far delivered, little tangible.

Support.

So what makes you believe?

That those measures by the IMF and G20 are still not sufficient, maybe in terms of their scale and maybe their level of global coordination.

The second question is.

The report proposed to.

Establish a international body to oversee.

Developing country debt relief programme.

To me this.

Proposition is really ambitious, especially when multilateralism faces right now it's headwinds.

So what convinced?

You that it is.

Necessary to have such an.

International authority and why the existing institutions are not capable to deal.

With the debt issues.

And is it feasible, the establishment of such an international body right now?

Thank you.

Stephanie, do you want to take the scale question?

Yes, I mean as you point out in the in in the in the report that broad estimations of liquidity financing needs in developing countries range around 2.5 trillion U.S.

dollars over the next few months.

And that is an estimate that has come on a slightly different assumption both from IMF and US So far in terms of debt related responses we have compared to 2.5 trillion needs we have through debt relief 215,000,000.

And we have at present since only bilateral creditors, official creditors have joined this initiative around 20 billion for selected 73 developing countries until the end of 2020 in suspension not relief of of debt payments.

Now, given what both Richard and I have said in terms of what the financing requirements, finances gaps are, not even taking account of Agenda 2030 and what the capacity of most developing countries and China in that regard certainly is an exception.

But other than this, what the limitations are in terms of developing countries mobilising their own financial resources, it would seem that what is currently on offer in this regard is is peanuts to to to be straightforward, you can also look at it in terms of the 20 billion that currently come under the G20 proposal as debt suspension, temporary debt suspension until end 2020.

Relative to what?

To what?

The outstanding debt obligations on public external debt only are in 20 and 21, which for those economies we have it in the in the report remount amount to to to much higher levels.

That's our, if you have this in front of you, that's our figure 7.

So we're looking overall at an amount of just short of half a trillion of debt, debt payments to all creditors outstanding only over the next two years in those selected 73 countries.

I hope that makes clear that the scale of what is what is offered here is entirely in commensurate with what the needs are only on the debt level.

Now on the international body.

Richard, if you want to come in, I I can.

Yeah.

I mean, it's, of course, it's a, it's we are, this is taking place in the context in which multilateralism in general is not in good shape.

I mean, that's quite clear what the main countries and, and a lot of the focus so far has been on the US, China and EU as the core of the G20 framework are, are struggling to come to terms with and which they all understand, I think is the importance of coordination in responding to this crisis.

Every, every, when you listen to G20, all G20 members, they will talk about the importance of coordination to make sure the initiatives that they are launching produce the kind of result that is expected.

If countries simply do it in isolation, you don't get the same bang for your buck as when as when these initiatives are done collectively.

So coordination is back on the discussion agenda.

And resil the, the other favourite word that we're hearing endlessly now is resilience.

Resilience is the favourite word now of the the great and the good who determine policy and reform in this world.

And it's, and it's correct because we've been, we've suddenly been exposed to the fact that we don't live in a very resilient world.

And so, and so I think these are, these are kind of ideological pressures which are forcing people to think differently from what they were only what they were doing 3 months ago.

And we've already seen that in terms of policy.

So all the policies that the G20 leaders are implementing were policies that were either dismissed or or or or or or or said were impossible just three months ago.

Keynesian type macroeconomic policies, the use of basic income, the rejection of the German finance minister of debt and financing rules which were deemed sacrosanct until a couple of months ago, etcetera.

So the neoliberal policy rulebook has been torn up.

That's just.

Clear from what happens, I think the next stage is to understand that to get an effective response from the actual measures that you are implementing, institutional reform will be necessary.

And that's already happening at the national level.

Donald Trump is now drawing on legislation and institutions that were created in the 1950s to respond to the Korean War, for example.

So so there's AI think the next stage is institutional change.

And this is the kind of institutional change that we think will be necessary at the international level to get the more resilient world economy that all these leaders are saying is essential coming out of the crisis.

Just on a couple of, I think related point, we we quote Ken Rogoff at the end of this report, who was the former chief economist of the white IMF, who 20 years ago said that institutional change seems impossible until it happens.

And I think we're we are now in and until it happens moment.

So, so we'll have to see what happens in, in the, there is of course a very important role for China in this story because China's been a very important in the context of the Belton Rd has been a very important player in providing new growth opportunities for developing countries that includes both trade and lending.

And so China's role in, in, in, in, in fashioning a more resilient and coordinated and cooperative multilateral system, I think is actually very pivotal in this context.

So, so China's role I think is and China's role I think will be different this time than it was in 2000 and eight, 2009 when it still didn't have the same kind of international connections that it does today.

So there's changes in the in the, in the, in the world that we've lived through over the last 10 years that I think make these kinds of institutional reforms more prescient than than than than they've been for a long time.

Thank you, Richard.

I have Joe Bavier next on my list.

Joe, you have the floor.

Yes.

My question is about the participation of of.

Private creditors, you made the.

Point that in the.

Last 10.

Years private creditors have contributed substantially to developing world debt.

How?

What?

What do you think is?

Required on the on.

The level of national legislation to.

Oblige private creditors to participate.

In any debt relief, I know that the G20 kind of debt moratorium.

Made an appeal to them to participate voluntarily.

From what you're saying, that's not going to be good enough.

So what do you think?

Major economies need to do in terms of legislation to.

Ensure.

That A.

A global debt deal for.

Developing nations is possible, Stephanie.

I think that's your.

Baby.

Yeah.

I mean as we sort of briefly mentioned in the report, of course the haphazard ad hoc resolutions or or or or negotiations with private creditors have been a very serious problems for developing countries.

Now this does apply in the first instance to **** income middle income developing countries where the share of participation of private creditors in their external debt obligations and their refinancing in international financial markets through in particular bonds is considerably higher than in in most low income countries where the strength though has been on the increase as well.

Now as we point out there is a box in the in the report box 1 it is that looks at past developments.

We have an extremely ad hoc non binding arrangement in the London club that originally applied also only to commercial bank loans to to debtor nations.

But that has included sort of informally and in this attack way expanded to include non bank financial institutions such as hedge funds for example that deal in in secondary markets in particular with bonds.

Now one result of this has been the the problem of holdout creditors or what is often referred to as Viaja funds that are particularly that stand out particularly in the in the possibilities of ***** and and and exploitation that arise from a lack of regulation in this regard.

IE where you're looking at funds specialised in buying up distressed sovereign bonds with the only intention of pricing for repayment at full face value plus interest in, in the, the, the, the courts, in particular the New York District Court, UK courts and so on and so on that govern the, the rules, the legislation for those particular sovereign bonds.

Now this is a situation that has been commented on for quite some time calling upon, I mean the first step that we think would be necessary is for private creditors A to join longer, deeper, more comprehensive temporary standstills.

It's all there's not very much at present.

And that alone is, is a problematic situation that G20 governments, for example, can do then rather than to call upon creditors.

And there is some kind of probably moral political pressure at present to for private creditors to join, to join those initiatives.

The Institute of International Finance that is that supports the the debt sustainability analysis and other macroeconomic analysis that runs through London club arrangements at present.

And that is the biggest financial industry, private financial industry association in the world has about 230 members.

Amongst them all the large commercial and investment banks, many multinational entities, many large insurance companies, etcetera, has itself issued, written to the World Bank, to the IMF to say that they are considering themselves calling on their members to join such an initiative for now, though being very clear that it has to be limited to debt suspensions and must not involve any wavering of that obligations now.

So the first concrete step would be to leverage that kind of pressure for as as many as possible private creditors to to to join temporary standstills and to join them on a, as I said, on a more substantive basis.

Secondly, temporary standstills and request for forbearance by data countries should normally imply an automatic standstill on creditor enforcement action.

So joining this kind of initiative would also mean that non cooperative private creditors cannot exploit the current lack of international regulation on this, at least not easily to push for.

Through through push through litigation for recovering full waste face value of of sovereign debt that they have bought at often 20 to 30% on sometimes even less of that face value.

So temporary stencils in the in the detail have that important provision that it means holding current legal procedures instantly, holding legal procedures on the on the debt included under such temporary standstills immediately.

That doesn't necessarily solve the problem of ongoing legal procedures, but surely if something like this could be agreed that could be easily brought on board as well.

Now in terms of national legislations, the the problem has always been that there is in particular one national legislation in to to deal with the problem of vulture funds of non cooperative private creditors.

That's the Belgian legislation that was heavily contested by a handful of very large, the largest of those vulture funds, precisely because it was so effective effectively in a number of ways made it impossible for voucher funds to pursue with this kind of litigious strategy to squeeze the last penny.

And more than that out of out of developing countries with with distressed sovereign bonds.

Where this has gotten stuck is precisely in that where such legislation would need to be implemented is in the financial centres that govern most of the foreign currency denominated sovereign sovereign bonds.

Again, this seemed a very far remote possibility.

That is New York district, it is London to some extent couple of other financial centres.

But again, as Richard said before, in in a, in a situation where taboos need to be broken and where pressures can be brought to, to, to bear to afford what is relatively minimal international actions.

I'm only talking about standstills.

Yeah, I'm not talking about long term resolution of these debt burdens.

Maybe the door now is open to, to consider this more seriously, but it would have to be done in some more internationally coordinated, not necessarily global, but internationally coordinated initiative as we suggest, under some kind of authority that allows coordinated action.

And the, the the the weakness of dealing with what is the most abusive behaviour in international financial markets as far as sovereign bonds are concerned, namely voucher funds, has failed precisely because it remained limited to a well meaning legislation, the Belgian legislation that did a great job in actually working on the details of this legislation.

But that of course is not a financial centre in the world.

So that is where coordination and where coordinated pressures to in this current situation and of course of solidarity might perhaps move forward.

But it would have to be an essential ingredient of any kind of global debt deal that there is the most, the highest possible pressure being brought on private creditors to join that will not necessarily impede they're always being being violent, just that.

But I mean their ability to act, the ability to be successful as they were in the case, for example of the Argentine, Argentine deal in 2015, early 2016 would could certainly be limited.

Just just a point on Joe, I think I mean one of the, and it speaks to the previous question.

I think one of the things that's going to change the narrative is that the one of the consequences of these huge packages that the core countries are implementing is that issues around debt are going to be upfront and centre politically in these countries themselves.

So, you know, I mean, a lot of what we're seeing in terms of the packages are in one way or another debt related.

And, and, and the scale of this means that they become political issues as we move into the questions of how we recover, how we make these economies more resilient, that will be hanging over developed economies as they've been hanging over developing economies for so long.

So there's going to be a kind of different type of, I think and I hope a different type kind of political discussion in which both developed and developing countries have to think much harder about dealing with the problem of debt overhang and in ways that they haven't done before.

Thank you.

Good afternoon.

Peter.

Kinney here, I see your.

Hand raised.

You have the floor.

Yeah, actually it's just following.

On.

What Richard said is what you said.

Taboos have to be broken and you need internationally coordinated response to it.

Now, from what I've heard this afternoon, we've.

Heard a lot about.

What the problem is?

But not how.

We can solve the problem.

Is there no international group at the moment that can act as an honest?

Broker that can.

Bring countries like China and the US and developing countries and debtors and creditors together.

Is there nobody who can play a convening role that you can see?

At the moment.

Or is this?

Are we just?

Going to have to, as everybody has been saying here, hope.

That this will come about.

I mean, I, I, yeah, as I mentioned, there are some initiatives under way by groups of certainly foreign ministers certainly may know the details of this.

I think there were 24 from developed and developing countries recently who came together to make demands of of a similar nature to what we are doing.

The Pope has played a very important role.

I, you know, debt has become a very central issue for in, in the, in the discourse of the Vatican.

And, you know, the Pope has been a key figure in bringing parties together under some instances.

And then, of course, the UN has that convening role, too.

We're not a creditor.

We're not a debtor As such, we can't borrow as an institution.

So, so I mean, there's a certain, there are, there are venues I think that will need to be exploited When, when, when really kind of moving from the discussion of what needs to be done to how to do it.

So I mean, it's, I mean, it's very easy.

I know it's very easy in the current conjuncture when you look at the geopolitical situation to, to be pessimistic about the, the possibility of, of institutional change.

But, but you know, this is a different crisis.

This is not the 2008 crisis.

This is not the East Asian financial crisis.

This is of a much deeper and a much wider nature with much more profound consequences both for the economics and politics of developing and developed countries alike.

And, and as I said, there are, there are, there are clearly, at least in my mind, areas where, you know, convergence is clearly happening and at some point that convergence will have to translate into genuine solutions to problems that do hurt everybody and not just subsets of the global economy.

Thank you, Richard.

I don't have any other.

Hand raised, so we have.

Some more.

Minutes if you wish to ask any additional clarification.

I don't see any winning a little bit more.

Just to precise that, this report and the press release and the press conference are under embargo until 3P.

MGMT It's.

5:00 PM Geneva Time and the team, Richard, Stephanie and other colleagues are ready to answer any.

Other questions you may have right in your piece, I think we'll stop here.

Thank you very much and have a nice afternoon.

OK.

Thank you everybody.