By Gina Ekholt, Eurodad member Norwegian Coalition for Debt Cancellation (SLUG)
August 15th was a historic day for international debt justice, as the Norwegian government launched the worldâs first audit commissioned by a creditor, which evaluates the debt that developing countries owe to Norway. The report found that four of the 34 contracts were not in line with the UN Principles.âWe hope the government will follow up this important report by cancelling illegitimate debt based on creditor co-responsibility,â says director of the Norwegian Coalition for Debt Cancellation (SLUG), Gina Ekholt.
In 2012 the Norwegian government commissioned an official audit to evaluate whether the developing country debt currently owed to Norway resulted from irresponsible lending. To evaluate the claims, the audit has employed the recently launched principles for promoting responsible lending and borrowing from the UN Conference for Trade and Development (the UNCTAD Principles) as well as the Norwegian Export Credit Agencyâs (GIEK) current guidelines.
During a press conference in Oslo August 15th, the consultant firm Deloitte presented their results from the independent report conducted this summer. The application of the UN Principles on the old loans shows that four of the 34 contracts examined were neither in line with the current guidelines nor the UN Principles. This was the case for the loans to Pakistan, Indonesia, Myanmar and Zimbabwe, and the Norwegian government assures that they will look into these debts.
From principles to practice
The Norwegian initiative has also demonstrated how the UNCTAD principles can be implemented in practice, and the report makes several recommendations on how to strengthen their applicability. âThis is critical, because the UNCTAD Principles potentially serve both retrospective and future purpose. They can provide a means to check past debts, and a guide to prevent future illegitimate lending,â says Ekholt.
Debt audits carried out by creditors using the UNCTAD principles provide a practical means to determine whether debts are in fact illegitimate and should be cancelled. The implementation of the UN Principles and the undertaking of debt audits can be decisive for developing countries struggling under unfair, odious and illegitimate debt.
NGO shadow report: More dirty debts
Parallel to the official audit, The Norwegian Coalition for Debt Cancellation (SLUG) has made a shadow report investigating the loans to Indonesia, Egypt and Myanmar. âThe project in Indonesia left the population in the county with debts from projects that never yielded any developmental benefits, and that had been contracted by the illegitimate regime of Suharto,â says the author of the report Maria Dyveke Styve.
âOur report shows that the contract with Indonesia constitutes a clear example of irresponsible lending, and Norway must now assume creditor responsibility for Indonesiaâs debts and cancel it unilaterally and unconditionally,â points out Ekholt. This would be in line with the precedent set when Norway assumed creditor responsibility for the debt derived from a failed development project â the Ship Export Campaign of the late 70's.
Summary of SLUGâs recommendations to the Norwegian government:
Exportable? How to make the
Norwegian Debt Audit Transferable to Other Countries, By Ingrid Harvold Kvangraven
Creditor Responsibility and the Norwegian Ship Export Campaign, By Kjetil G. Abildsnes (SLUG and FORUM)
Eurodadâs Responsible Finance Charter, Eurodad 2011
Is Indonesiaâs debt to Norway illegitimate? By Magnus FlackÃ© (SLUG) and Nikmah Khoirun (INFID)
Unctadâs Principles on Promoting Responsible Sovereign Lending and Borrowing, UNCTAD 2012