Securing Sustainable Solutions to the African Debt Crises

The last two decades have seen the economic prospects of many developing countries thwarted by debt crises. Creditors have responded with a series of piecemeal but ultimately unsatisfactory mechanisms. These initiatives have in most cases aggravated the problem and failed to resolve the fundamental factor underlying the debt crisis; the power imbalance that exists between debtors and creditors.

AFRODAD contends that arbitration offers an alternative that addresses or eliminates the power imbalance. Currently there is no platform/mechanism in the world that has jurisdiction over cases of debt disputes between sovereign states. New Instruments and Institutions that should bring about structure changes that will reshape global relations around the debt crisis are now required. A Fair and Transparent Arbitration Mechanism (FTAM) to specifically address the debt problem should be established under the United Nations system.

A Fair and Transparent Arbitration Mechanism that is broader in scope, more inclusive and participatory is required to bring about a permanent solution to the debt overhang largely responsible for abject poverty and economic doldrums in developing countries.

Arbitration agreements allow for settlement or final decisions to be made on grounds other than purely legal principles, such as considerations of justice, equity and human rights.

The Debt Arbitration will achieve the following;

  • Give the affected people of the South a right to be heard before an arbiter
  • Deal thoroughly with past, present and future debts by fostering the culture of responsible lending to the creditor and prudent borrowing to the Debtor.
  • An independent panel shall judge debt sustainability. It will ensure considerations of debt sustainability within the development context of each debtor country whereby government revenues are balanced against the needs to finance poverty reduction programmes.
  • It will help extend debt cancellation to other poor countries that are short of resources to meet the MDGs or where creditor rights are being implemented at the cost of human rights.
    • Enshrine the principle that basic human rights take precedence over creditor rights.
    • Removes the harsh conditionalities and restrictive eligibility criteria for debt cancellation that still hangs on many poor countries.
    • Ascertain the legitimacy of claims by both the creditor and Debtor countries.