Organisers: Transparency International Sri Lanka, National Democratic Institute, FEMNET
Moderator:
- Corina Rebegea, National Democratic Institute, Senior Anti-Corruption Advisor.
Panelists:
- François Valerian, Transparency International, Board Chair.
- Nicole Maloba, Economic Justice and Rights Lead, FEMNET.
- Nadishani Perera, Executive Director, Transparency International Sri Lanka.
- Rhoda Weeks-Brown, General Counsel and Director of the Legal Department, IMF.
A recording of this CSPF event can be watched here.
Corina: The impact of the debt crisis is well known, but there is also an accompanying governance crisis.
It is important that citizens and the marginalised, who will be most affected by debt repayments and debt crises, are included in decision making processes regarding debt and are able to understand what is at stake.
Lack of oversight has wide ranging consequences, not just for debt.
Transparency is important to ensure that debt does not fuel corruption.
Opaque debt practices fuels a lack of accountability.
National Democratic Institute (NDI) and Transparency International (TI) are launching a tool for civil society for transparency and debt management today, a debt accountability and transparency checklist comprising 13 principles, broken down into 59 good practices, all informed by good government principles.
François: Governments can borrow even though they may not be solvent. Why? TI argues that is because there is a third party in the equation – the public of the country whose government takes out the debt.
Political leaders negotiate loans that they won’t repay, but which will be repaid by their citizens. And lenders think that there will always be ways to figure something out – increased taxes, reduced spending, or refinancing from others like the IMF.
This also favours corrupt behaviours. Some leaders want to issue debt because previous funds were stolen, or they want to steal the new loans.
On the lender’s side, there are capital markets and national governments. Capital markets target those with appetites for high yield. These borrowers have an appetite for bad government. Governments lending money often do so in return for some power or influence over the borrower. Lending used as a weapon of strategic corruption. Often debts are hidden off books. These lenders could take over management of public goods like airports, etc.
There is a strong link between abuse of public debt and abuse of power and corruption.
Rhoda: Accountability is important for the IMF as lack of it has serious consequences for economic development and citizens.
Hidden debt estimated to be a trillion USD globally. Higher interest rates and weaker growth mean debt and especially hidden debt is now more prominent an issue than before.
Hidden debt and lack of debt transparency increases risk of corruption. A lack of transparency and clarity on debt has led to corruption in many cases. Guarantees given by governments are often opaque and open to abuse.
Clarity and transparency are essential for standards of better governance. It also enables public involvement in discussions on debt and development.
IMF actively supports debt transparency. There is a new report on legal foundations for debt transparency, in which they revised public debt management guidelines, with new transparency standards. They conduct regular assessments of countries against these guidelines. The report surveyed 85 countries, debtor and creditor countries, looking at laws and what debt transparency actually means. They found that too often the laws had structural weaknesses, and this report gave practical guidance on how laws could be improved.
Less than half of surveyed countries required debt management and fiscal reports, and less than a quarter required loan level disclosures. There was also no standard definition of what debt is. Many countries don’t consider SOEs debt as public debt. Collateralised debt is often not treated as debt because it can be structured differently and be opaque, PPPs can be opaque, etc. The authorisation framework can be vague.
This can all exacerbate the risks of unauthorised borrowing. Debt management can also be fragmented in governments. Often decision makers can decide what is confidential and what is not.
Law reform needs to be top of the agenda when we look at debt reform. It is a long game. Laws then need to be entrenched into practice.
Many countries have instituted these sorts of transparency-enhancing legal reforms… Ecuador has reformed its laws of late, Kenya has a history of transparency measures, Poland has authorised legislative oversight of confidential information, etc. Aggregate data isn’t enough, we need granular data.
Nadishani: A lot of power is entrusted to leaders to make decisions on the part of the people. Sri Lanka doesn’t lack expertise in government, but the government failed its people. Failure to govern in the national interest is in itself a form of corruption. The economic crisis in Sri Lanka was caused by poor governance.
When the crisis hit, people made a connection between the unsustainable debt (some undeclared) and the cost for everybody in the country, but there was no transparency in public debt restructuring negotiations.
Debt in Sri Lanka has been used to maintain SOEs that have themselves been agents of corruption.
Civil society has argued that Sri Lanka meets the definition of kleptocracy. Debt has been a tool for maintenance of the kleptocracy. Sri Lanka is facing a situation of kleptocratic state capture. These regimes may adopt reforms as a way of providing cover. CSO voices were marginalised in Sri Lanka until they started working together.
IMF invited civil society for initial discussions on the governance diagnostic on Sri Lanka. But civil society wasn’t happy as they felt it didn’t capture the state kleptocratic system in Sri Lanka and allowed the government to tick easy boxes and claim it is acting against corruption.
Civil society wondered if it could do its own shadow diagnostic. To make sure this had an impact, they worked to unify civil society, and brought donors on side; they all understood that the crisis in Sri Lanka was a crisis of governance.
Nicole: Women and marginalised groups must be enabled, but a more feminist inclusive economy is actively undermined by three factors that structure the modern economy.
First is neoliberalism – the enduring agenda of liberalisation, privatisation, deregulation, which has led to the autonomy of many governments being undermined and prioritising the interests of business over fulfilling the economic and social rights of their own people.
Second is financialisation – financial markets, motives and institutions have restructured the global economy, regulation and sectors like health.
Monopoly capitalism – owners of capital acting to restrain supply, and restructure markets in their own interest, increasing prices.
It would be good to understand that current international financial architecture and its profit-based economic system does not support women’s economic, social and cultural rights, and undermines human rights. It has made many goals unobtainable.
It is hard to address all of this, but feminist perspectives are needed to challenge existing perspectives and contribute to policy making spaces.
There are challenges, though. We need to go beyond representation. Putting women in positions of power isn’t enough as that might not translate into feminist policies.
Comprehensive transparency, inclusivity and consultation are needed in policy making spaces.
Many governments are taking debt to service previous debts, they can be forced into austerity, regressive taxation, etc, which impacts women disproportionately.
Many governments are pushing infrastructure development, but not spending on education, social protection, health, etc, which is what women really need to enable and empower them.
Responsible budgeting is important, but not just traditional gender-responsive budgeting in which money is earmarked for gender projects, but having gender concerns included in all decision making.
For new gender strategies, feminist policies including even feminist foreign policies, we need to look at what happened with previous policies that failed or delivered mixed results.
Transparency is important, civil society needs to be able to access the data. But we need a rights based approach, not a fiscal framework. Debt has a profound impact on human rights, especially on the human rights of women. Governments mustn’t be hindered in meeting their human rights obligations by their fiscal obligations, and creditor-driven approaches to debt crises must consider human rights.
Debt is a multifaceted issue; we must address debt through a human rights framework, ensuring all have access to health, housing etc… governments cannot be hindered in realising their human rights obligations through debt burdens.
Citizens are saying to lenders please do not lend to this government as we are not seeing any benefit from these loans.
The Conventional on the Elimination of Discrimination Against Women (CEDAW) doesn’t mention debt, but its article 2 commits state signatories to employing all appropriate means to achieve the realisation of rights and remove all obstacles, and it is clear this applies to debt burdens.
The existing international financial architecture doesn’t take into account what is needed to SDG5, achieving gender equality and empowering all women and girls.
François: The checklist launched today with NDI is to bring back the third party to the table… civil society should be at the table along with governments and lenders.
SOEs in many countries enjoy the best of both worlds, and can take on any debt they want. We also have to know what the debt is for. This means budget transparency is important. Most public contracts are not made public. Many governments say they have a mandate because they were elected and say that no further accountability or transparency is needed.
It is important for civil society and parliaments to have information on oversight on debt and budgets. Parliaments have traditionally had a role in oversight. It helps the government when civil society is involved – at least it helps well-intentioned governments.
This can help address the information asymmetry that often exists with lenders.
An engaged and informed civil society can also de-risk national economies.
The IMF should systematically include civil society in debt negotiations as they did with Sri Lanka.
Lenders of last resort have a problem with moral hazard, and this can help with that. Civil society’s inclusion can reduce moral hazard by eliminating those who are benefiting from the system.
Questions and answers:
Jose Fernanda, Center for Strategic and International Studies: Parliamentary controls over sovereign debt are a way to control a debt crisis.
Samir Trabelsi, Professor of Accounting from Brock University in Canada: Accountancy and controls are important. Out of 190 countries, only 30 fully adopt IPSA (Independent Parliamentary Standards Authority) standards. Global institutions need to fully enforce IPSA. Operational transparency is the second aspect of transparency. The IMF and WBG don’t have the human capital to do the job, but they can partner with accounting associations and universities, who can help build human capacity across 190 countries.
Dr Ward, US economist: You need to follow the money to get to the corruption. You need a strong organisation to address corruption when it happens.
Closing comments:
Rhoda Weeks-Brown: The IMF can’t fix corruption, but it can fix some of the cracks corruption can come through.
Nadishani Perera: In a state capture situation, CSOs are helpless, the government only listens to parties that provide them money. CSOs need organisations to fund them, they need to hold the government to account and not let them take away civil space.
