Draft NY state law a ‘golden opportunity’ to ensure fair debt relief

An aerial view of the downtown Financial District of New York City.

8 June 2023Human Rights

Proposed legislation in New York state, in the northeast United States, could provide effective and fair relief for developing countries crippled by debt, two experts appointed by the UN Human Rights Council said on Thursday.

Olivier de Schutter, Special Rapporteur on extreme poverty and human rights, and Attiya Waris, Independent Expert on foreign debt and human rights, have welcomed the proposed New York Taxpayer and International Debt Crises Prevention Act, which is currently under discussion.

They urged lawmakers to adopt the draft bill, which compels private creditors to participate in international debt relief efforts on similar terms as public lenders.

Fair for all

New York State is home to New York City, the financial capital of the world.

Some 60 per cent of developing country debt is held by private creditors, and New York law governs 52 per cent of this global debt, according to the experts.

“If taxpayers contribute to public debt relief, private creditors should be obliged to participate on the same terms,” they said. “Debt relief must be effective and fair for all, and its costs must be shared by private creditors as well.”

The proposed legislation means distressed low and middle-income countries would be able to protect the economic, social and cultural rights of their citizens instead of paying “unsustainable” debt loads.

Shift budget priorities

In 2021, these nations spent an average of 27.5 per cent of their budgets on interest and debt payments, or more than the amount spent on education, health and social protection combined.

“This bill is a golden opportunity that will allow countries in debt distress to shift their budgetary priorities and, by providing for better living conditions, reduce the risks for investors in these countries and create better opportunities,” they said.

The experts stressed that the COVID-19 pandemic, the energy crisis, rising food prices and inflation, have led to an increase in unsustainable debt for many countries, with a particular impact on developing nations.

“Many poor people can barely afford food and minimum dietary needs for health. It is precisely in times of crisis that States must be able to ensure social protection and food security for all people in their country,” they added.

They underscored that “everyone has an interest in countries being able to invest in social protection, healthcare, housing, education and food security, instead of devoting more and more of their limited budgets to debt repayments.”