The world is experiencing another debt crisis. More than three billion people live in countries that spend more on interest payments than on education or health. In 2024, external debt service payments reached an all-time high for countries in the global south, with 45 nations dedicating over 15 per cent of government revenues to debt servicing. This crisis has also reached several European countries, including Ukraine, the Republic of Moldova, and Uzbekistan, which have reached critical debt levels in the last three years.

At the heart of the problem is the absence of a fair and equitable debt resolution mechanism, which leaves countries with limited options to avoid default. The current international financial architecture provides no tools to prevent accumulation of unsustainable and illegitimate debts. It also lacks rules-based mandatory frameworks to promote responsible lending and borrowing; debt transparency; and approaches to debt sustainability with human rights and other social, gender, climate, or development considerations at its core.

Currently, when a country faces problems in repaying its debts, there is no formal, organised system or set of rules governing sovereign debt restructurings. The G20 Common Framework for Debt Treatment (CF) was established in November 2020 to provide timely and efficient debt restructurings for lower income countries. However, the CF lacks inclusive global south participation and predictability, and its implementation has not delivered any substantial debt cancellation in the last four years. The CF is limited to a list of 73 countries and so far only four have requested debt treatment under this framework: Chad, Ethiopia, Ghana, and Zambia. Countries in deep debt distress like Suriname or Sri Lanka are excluded from the list of eligible countries. Many countries are therefore left to negotiate with their creditors directly and separately. Furthermore, the CF is not binding to private creditors, it excludes multilateral debts, and debt cancellation is only considered in exceptional cases.

In the current system, debt problems are addressed according to the needs and interests of creditors, namely: the G20, including China, other non-traditional lenders, and the Paris Club; the International Monetary Fund (IMF), the World Bank, and other multilateral creditors; and private creditors, particularly asset management companies that manage most of the bondholder debt. For instance, the G20, bondholders, and International Financial Institutions (IFIs) constitute the majority in the recently formed Global Sovereign Debt Roundtable (GSDR), an initiative established in February 2023 to bring creditor and debtor countries to the same table. Since its inception, the Roundtable has been criticised for this unequal weighting as well as its lack of inclusive participation from borrowing countries.

Where there are no repayment problems, other elements of the life cycle of sovereign debt could still benefit from a binding statutory framework of rules and principles to prevent debt crises. The United Nations Conference on Trade and Development (UNCTAD) did release responsible lending and borrowing principles, but they are voluntary. A new debt architecture should promote responsible lending and borrowing rules that are binding for all official and private creditors and all borrowers. Furthermore, debt data and debt management suffer from a lack of transparency, so the world would also benefit from a global registry for debt transparency.

Ultimately, reforming the international financial architecture would be in the interests of the broader global community, paving the way for human rights-centred, sustainable, long-term development.

An agreement on the need for a debt convention would open up an intergovernmental process towards the debt architecture reform needed to prevent unsustainable and illegitimate debt accumulation and provide fair and sustainable solutions to sovereign debt crises across the globe.

Currently, while the UN Guiding Principles on Debt and Human Rights establish
the primacy of human rights over debt service, in practice we see governments
prioritising debt servicing over financing public services and guaranteeing human rights. A statutory framework could also clarify the status of debt contracts vis-àvis human rights treaties and give adequate guidance to courts worldwide.

Other necessary reforms include:

• a new approach towards and assessment of debt sustainability;
• an automatic mechanism for debt payments’ standstill in the wake of external shocks;
• the promotion of domestic legislation
• and the regulation of certain features of the financial system.

A debt convention would have all the UN Member States at the negotiating table discussing these and other necessary reforms. Without a debt convention, the current non-regime will keep global south countries in the vicious circle of new borrowing and austerity for debt repayment.

The UN is arguably the only multilateral forum where such a mandate can be fulfilled through an intergovernmental process in which all countries participate on an equal footing. The fact that the UN itself is neither debtor nor creditor makes it the “only inclusive and truly democratic space to advance on the systemic reforms needed to re-design a skewed and dysfunctional international financial architecture towards supporting human rights-centred sustainable development”.

First and foremost, the UN Charter mandates the UN system to promote solutions for international economic issues, particularly through the Economic and Social Council (ECOSOC). Additionally, debt was at the core of UNCTAD’s work standing on the side of global south countries in debt crisis, even before the outbreak of the 1980s debt crisis.

The First UN International Conference on Financing for Development (FfD) took place in Monterrey, Mexico in March 2002. Since then, the democratisation of global economic governance has remained at the heart of the FfD process, with sovereign debt as one of the core issues of the FfD agenda. In Monterrey, UN Member States agreed on providing “fair burden-sharing between public and private sectors and between debtors, creditors and investors” in financial crisis resolution, and encouraged the exploration of “innovative mechanisms to comprehensively address debt problems of developing countries”. It also emphasised the importance of ensuring long-term debt sustainability to prevent future crises, advocating for responsible lending and borrowing practices to avoid the accumulation of unsustainable debt.

In April 2012, after a thorough consultation with member states and other stakeholders, UNCTAD launched the ‘Principles on Promoting Responsible Sovereign Lending and Borrowing’. This compilation of non-binding soft law encourages responsible behaviour by both borrowers and lenders, advocating for fair terms, informed decisions, and public consent in lending and borrowing processes. But it remains unenforceable as the principles are voluntary.

The UN mandate on debt architecture reform also comes specifically from the UN General Assembly resolution 68/304, adopted in September 2014, after a proposal championed by Argentina. The resolution recognised the sovereign right of any state to restructure its debt without interference from other states and highlighted the lack of a sound legal framework for orderly and predictable sovereign debt restructuring. Through this resolution, a majority of member states decided “to elaborate and adopt through a process of intergovernmental negotiations (...) a multilateral legal framework for sovereign debt restructuring processes”. The next FfD Conference provides the ideal opportunity to agree on a debt convention that revives the commitment made in the 68/304 resolution in 2014.

Resolution 68/304 was adopted in September 2014, with 124 votes in favour, 41 abstentions, and 11 votes against. It recognises the sovereign right of any state to restructure its debt without interference from other states and highlighted the lack of a sound legal framework for orderly and predictable sovereign debt restructuring.

However, the process was resisted by creditor countries. In response, the G77 tabled a less ambitious resolution at the General Assembly in September 2015 to adopt the “Basic Principles on sovereign debt restructuring processes”. This resolution outlined basic voluntary principles, emphasising fairness, transparency, and sustainability, but they have never been fully implemented.

In parallel to that process, the Third UN Financing for Development Conference took place in Ethiopia in July 2015 and delivered the Addis Ababa Action Agenda (AAAA), which failed to progress the discussions on debt architecture reform. The momentum was lost as creditor countries defended the status quo and pushed for debt issues to come exclusively under the mandate of global creditor-led institutions, like the Paris Club, G20, and the IMF.18

Since the AAAA in 2015 (see Question 4), calls for reform of the global financial architecture, and particularly improvements to debt crisis prevention and resolution, have become more and more frequent at the UN.

For instance, the UNGA annual resolutions on ‘debt and debt sustainability’, as well as the annual outcome documents of the UN ECOSOC Financing for Development Forums, have included calls for enhancing or improving the international financial architecture and for debt mechanisms that aid crisis prevention and resolution.

The impacts of the Covid-19 crisis also worsened the debt situation in many global south countries and led to various initiatives, including:

• Financing for Development in the Era of Covid-19 and Beyond Initiative (FFDI).
• UN Secretary-General brief on Reforms to the International Financial Architecture as part of the proposal for “Our Common Agenda”.
• UNCTAD proposal for improving debt workouts and a global debt authority in its “Trade and Development Report” for 2023.

A framework convention, under international law, is a “type of legally binding treaty which establishes broader commitments for its parties and leaves the setting of specific targets either to subsequent more detailed agreements (usually called protocols) or to national legislation”.

The framework convention model offers more flexibility than other international treaty models while also being legally binding. Framework conventions usually have two parts: the main treaty text and the protocols or annexes. The main treaty part allows member states to define the scope of the problem in general terms and to establish the basic principles, institutions, agreements, and decision-making mechanisms. The protocols or annexes allow further negotiation and the definition of more precise standards, regulations, or agreements. A well-known example is the United Nations Framework Convention on Climate Change (UNFCCC), which includes follow-up protocols like the Paris Agreement.

The debt convention would address the need for multilateral protocols on debt crisis resolution and on the prevention of future debt crises. This would build on the agreement in UN resolution 68/304 for a legal framework on sovereign debt resolution. In this sense, the debt convention would encompass the global consensus on the necessary rules, principles, and structures throughout the different interdependent stages of the debt cycle, to prevent unsustainable and illegitimate debt accumulation, and to offer fair and sustainable solutions to sovereign debt crises when they occur. This could be done by discussing and agreeing on a series of protocols within the debt convention on the different issues and reforms included in the infographic below.

Figure 1: New debt architecture for economic justice

See Eurodad’s policy paper “UN Framework Convention on Sovereign Debt: Building a New Debt Architecture for Economic Justice” for more details on the reforms that such a convention could include.

The debt convention refers to the set of international principles, rules, procedures, and structures to govern both debt crisis prevention and debt crisis resolution. In contrast, the Multilateral Sovereign Debt Resolution Mechanism (or debt workout mechanism) is a proposal to establish an independent body under UN auspices that is specifically designed to manage and resolve issues related to sovereign debt restructurings.

The debt convention would include the intergovernmental agreement to set up a permanent Multilateral Sovereign Debt Resolution Mechanism that ensures (a) the primacy of human rights over debt service and (b) a rules-based approach to orderly, fair, transparent, and durable debt crisis resolution, in a process convening all creditors. The mechanism would act as an independent institutional body and deal with the resolution of debt crises by responding to countries in default and/or in need of debt restructuring and cancellation.

The agreement of a debt convention, under the auspices of the UN, would ensure that reforms apply throughout the entire debt cycle, and not only in relation to debt resolution. In other words, the reforms would cover “the way in which debt is incurred, how debt instruments are issued, how debt management is structured, how debt sustainability is tracked and the options for debt workout”.

The civil society proposal for a debt convention argues that a new binding legal framework should address at least the following reforms:

• Multilateral Sovereign Debt Resolution Mechanism
• Binding responsible lending and borrowing principles
• Automatic mechanism for debt payments suspension in the wake of climatic and other external shocks
• Creation of a global debt transparency registry
• New independent debt sustainability frameworks
• Promotion of domestic legislative reforms for debt management, responsible borrowing and lending, and contribution to effective debt resolution.
• Regulation and supervision of financial institutions, including the asset management industry and credit rating agencies (CRAs).

The world needs a Multilateral Sovereign Debt Resolution Mechanism for the same reasons there are domestic frameworks for bankruptcy at the national level:

• to ensure an orderly process for countries unable to repay their debts;
• to guarantee that some creditors do not benefit at the expense of others;
• to avoid moral hazard;
• and to ensure a balance between debtors’ and creditors’ needs and interests.

For sovereign debt there is also the need to protect human rights, the economy, and the right to development, by enabling insolvent debtor countries to resume their economic activity and development process.

All countries facing risks of debt distress should have access to a timely and comprehensive process to restructure their debts, including debt cancellation when needed. This is not guaranteed by the current global financial architecture. As established in the UN 68/304 resolution for a legal framework on debt restructuring, a Multilateral Sovereign Debt Resolution Mechanism would work to increase the efficiency, stability, and predictability of the international financial system.

Civil society believes that any Multilateral Sovereign Debt Resolution Mechanism should follow 10 essential principles.

1. Creation of a multilateral debt resolution body, independent from creditors and debtors.
2. The process may be initiated by the borrower, and such request would constitute the implementation of an automatic debt payments standstill by all creditors.
3. Initiation of the process should trigger a stay on creditor litigation.
4. Comprehensive process, treating all of a country’s debt stock in a single process.
5. Inclusive participation of all stakeholders including citizen representation of debtor countries.
6. Independent assessment of debt sustainability and the validity of individual claims.
7. Focused on debt sustainability that puts needs of population and imperative of dealing with climate change and biodiversity loss before debt service.
8. Respect for international human rights law and the realisation of international development commitments.
9. Transparency: negotiations and their outcomes must be made public.
10. Enforceability of the debt restructuring, including debt cancellation, agreed in the process, to all creditors.

Agreement on these or other principles, including principles and parameters to be applied in the actual debt restructurings, will have to be discussed and agreed upon by the majority of member states. Some of the parameters for debt restructuring are currently being discussed at the Global Sovereign Debt Roundtable. However, a more inclusive and transparent discussion is necessary so all member states can input on an equal footing in defining and agreeing principles and parameters

While all countries would participate in defining and establishing a Multilateral Sovereign Debt Resolution Mechanism, as well as the principles and parameters for debt restructuring, it doesn’t mean they will all take part in the debt restructuring processes under the mechanism. This will depend on the final composition and structure of the body. Instead, participation means all countries will have to agree on the rules, principles, and structures for the mechanism to deliver fair, durable, timely, and comprehensive debt resolution.

Additionally, once the rules, principles, and parameters of a fair debt restructuring are collectively decided, a debt resolution body, also defined by all member states, will have to make sure that these are applied in debt restructuring and cancellation processes, at the request of borrowing countries.

While UN processes may face challenges such as bureaucracy and competing interests, its ability to convene all countries fosters comprehensive participation and equitable decision-making, enhancing the likelihood of sustainable and universally accepted outcomes. Unlike forums dominated by specific groups or exclusive memberships like the Paris Club, which can be criticised for biases and blind spots, a UN intergovernmental process would strive for inclusivity and representation from all member states

The power dynamics between creditors and debtors in sovereign debt are complex, but while creditors collectively dominate debtors, individually they risk undermining or slowing down negotiations, which is in nobody’s interest. In the current “non regime”, creditors typically face a “collective action” problem: while a fair process with known rules would benefit everyone, each creditor has an incentive to avoid it to reap the most profit (or fewest losses) in the debt restructuring. There is a general reluctance to relinquish power to an institution, whether it is the UN or any other institutional framework. Creditors currently coordinate action first within the Paris Club, then at the G20, and finally under the GSDR. Each of these spaces is a little more inclusive than the last, as creditors realise they need to build a broader consensus to define efficient and lasting solutions. For multilateral development banks (MDBs) and donor governments, timely debt resolution reduces expensive delays, the risk of free-riders, and other problems that would make resolution even more costly, and it saves the willing creditors from exclusively bearing the financial burden, as seen with the Heavily Indebted Poor Countries (HIPC) initiative and the Multilateral Debt Relief Initiative (MDRI).

A debt convention under the UN could offer transparency, predictability, and efficiency that benefits all actors in the debt arena, including creditors. When a country is given timely and equal treatment in restructuring its debt, it can recover faster, leading to stronger economic growth. This increases the country’s ability to repay its creditors, benefiting them in the long run. Furthermore, power relations are not static and can be influenced by the position of borrowing countries (and particularly their collective positioning in country groups at the UN) as well as by global and national civil society advocacy and campaigning.

Finally, creditor countries also have significant interests in various UN agendas, such as climate change, human rights, and the Sustainable Development Goals (SDGs), and have opted for multilateral processes rather than free-riding to protect their status quo. Unsustainable debt poses a serious threat to achieving the SDGs. Debt crises divert vital resources away from social services, climate action, and economic development, which leaves countries unable to invest in key areas like education, healthcare, and environmental sustainability. If we fail to address the growing debt burden, the entire 2030 Agenda will be derailed.

A debt convention encompassing the establishment of a Multilateral Sovereign Debt Resolution Mechanism would be an international treaty that should be ratified by member states and transposed into domestic legislations in all jurisdictions. This transposition should include provisions and principles for an automatic standstill on payments and an automatic stay on creditor litigation, as well as establishing processes for dispute resolution. In this sense, rather than simply enforcing the results of a debt restructuring on private creditors, such domestic legislation would protect borrowing countries from potential lawsuits from uncollaborative creditors or other kinds of disputes.

In 2002, Anne Krueger (first deputy managing director of the International Monetary Fund – IMF), driven by the urgency of the debt crisis in Argentina, proposed a Sovereign Debt Restructuring Mechanism (SDRM) to IMF shareholders with the aim of “preserving asset values and protect[ing] creditors’ rights while paving the way toward an agreement that helps the debtor return to viability and growth”.

However, the proposal was ultimately shelved due to resistance from influential  IMF Board members, notably the US, which holds a de facto veto. Eleven years later, in April 2013, amidst the European (and particularly Greek) debt crisis and litigation against Argentina in the New York courts, the IMF undertook a review of its role in debt restructurings, looking at proposals to establish formal or informal statutory or institutional frameworks to improve them. Ultimately, the IMF Board and governors instructed the staff to focus more on technical, and  particularly contractual, improvements within existing policies.

The IMF’s failure to establish the SDRM over two decades ago, in a very different context, should not deter efforts to pursue a statutory reform of debt resolution. The proposal for the debt convention is a much more inclusive and comprehensive proposal than the IMF SDRM and, most importantly, it is intended to be independent from creditor-dominated institutions like the IMF

No, establishing the debt convention would address the shortcomings of the current system. As an informal body, the G20 lacks inclusivity and the formal authority to pass binding agreements, despite its influence in shaping outcomes. The IMF, while crucial as a lender of last resort, does not have any formal mediation or facilitation role in sovereign debt restructurings, although it plays this role informally. Additionally, as a creditor itself, the IMF has been criticised for its democratic deficit and perceived bias toward creditor interests. The IMF’s lack of independence undermines its credibility and raises questions regarding the fairness of its decisions. In 2023, the IMF, World Bank, and G20 created the Global Sovereign Debt Roundtable (GSDR), to advance towards agreements and principles for debt restructuring. However, the GSDR is still dominated by creditors, it is not fully inclusive to all borrowing countries, and it remains an informal space.

Furthermore, none of these institutions have jurisdiction for norms setting, unlike the UN. Under its founding charter, the UN has a broad and intergenerational mandate: “to establish conditions under which justice and respect for the obligations arising from treaties and other sources of international law can be maintained and to promote social progress and better standards of life in larger freedom”. The G20, the IMF, and the GSDR have historically prioritised voluntary approaches, which have proven inadequate. Making the debt architecture reform work for the people and the planet necessarily means going from an inefficient non-regime of voluntary principles to a statutory framework based on agreed rules and norms. The UN has a foundational mandate to undertake this.

Rather than duplication, an intergovernmental process at the UN towards a debt convention would ensure universal representation in discussions and decision making, including all borrowing countries from the global south. The debt convention would also facilitate coordination among well-established negotiation groups like the G77, AOSIS, and the African Group. Such a process would also allow for progressive governments in creditor countries to support the reform of the debt architecture towards a fair, inclusive, and transparent system, instead of having to follow the positions mandated by the G7 or the Paris Club. 

The Fourth UN Financing for Development Conference – the first on European soil – provides a historic opportunity to make the case for a solution to the current debt crisis. The process leading up to summer 2025 will be a key time for campaigning and advocacy by civil society organisations seeking systemic and comprehensive international financial architecture reforms.

We cannot wait any longer for a solution to the current debt crisis. The more we delay discussion around debt architecture reform, the worse it is for global south countries actively dealing with the effects of the debt crisis. Debt is killing the SDGs and the possibility of tackling the climate emergency, plus it has been crowding out resources from the most vulnerable populations, especially women and girls.

Looking at geopolitics today, an agreement for an overhaul of the global debt architecture might seem impossible. But the beauty of multilateralism and the UN is that it only takes the political will of a few to start a process and what seemed impossible suddenly becomes a reality. The recent example of the UN Tax Convention, tabled by the Africa group in November 2023 – and in negotiation today – provides hope that change in the debt architecture sphere is also possible. Similarly, by actively engaging in these discussions, European and other creditor countries can play a pivotal role in shaping a fairer financial system that addresses the needs of the most vulnerable nations.

The next FfD conference is a key milestone to advance towards that process. The groundwork laid now and at FfD4 will significantly influence the trajectory of the process and help ensure that we do not lose momentum in the fight for a fairer debt architecture. If we delay action, we risk prolonging the challenges faced by indebted  countries and missing a pivotal chance to solve future debt crises

There is growing global concern about the debt crisis in the global south, and debt related challenges continue to be a central topic in multilateral discussions. The demand for reforming the international financial architecture is gaining momentum, with nearly 50 world leaders advocating for efforts to achieve this shared objective. This reflects a broad consensus on the need for systemic changes to better manage debt while ensuring development progress. Civil society should play a critical role in increasing pressure on national governments, and regional and
global institutions, to advance this agenda.

Figure 2: Finance and debt-related topics in the United Nations General Assembly speeches by number of countries and share by country group in percentage (2023)

Source: United Nations Conference on Trade and Development (UNCTAD), A World of Debt: A Growing Burden to Global Prosperity

Beyond those who are worried about debt, we know that there are many countries, particularly in the global south, supporting the need for debt architecture reform:

The Group of 77 and China

The G77 and China have consistently supported the establishment of a multilateral legal framework for sovereign debt restructuring since 2015. In January 2024, the G77 and China met in Kampala, Uganda, and restated their call for “an improved global sovereign debt architecture with the meaningful participation of developing countries, allowing for fair, balanced and development-oriented treatment”.

The Alliance of Small Island States (AOSIS)

AOSIS has been one of the leading advocates for debt architecture reform, calling for a debt workout mechanism for countries most at risk of debt distress: “Countries need to prevent crises, find solutions, and there must be debt workout mechanisms for the most at-risk.” Also, the group has historically called for “the design of new and the enhancement of existing financial instruments to provide debt relief including through debt cancellation, debt suspensions, debt rescheduling and restructuring”.

The African Group

In July 2024, the African Group at the United Nations called for reform of the global financial architecture, as well as for addressing “debt distress through enhanced debt sustainability measures, including relief, suspension and cancellation” including “the establishment of a global legal framework”. The African Group also reinforced the call for reform in their input into the FfD4 elements paper when calling to “Create a multilateral sovereign debt workout mechanism” and “Establish a global debt authority”. This call comes in response to the severe debt crisis
plaguing African nations, which threatens to trigger more defaults, hinder Africa’s development, and jeopardise the achievement of the SDGs.

Other countries

The call by the African Group is also supported by individual countries in the continent, like Zambia, or country groups, like the Least Developed Countries (LDCs), which included in their input into the elements paper for FfD4 the proposal to “establish a comprehensive and transparent international debt resolution framework under the auspices of the United Nations” or a “debt workout mechanism under UN auspices”, respectively. Similarly, the input into the elements paper by Pakistan, Egypt, and Nigeria also proposes the creation of a multilateral sovereign debt workout mechanism, to initiate the negotiations on a multilateral legal framework for debt restructuring, and the establishment of a global debt authority to “oversee the multilateral sovereign debt workout mechanism and promote or implement other substantive changes of a statutory and contractual nature in sovereign debt management”. Similarly, the Like- Minded Group for Middle-Income Countries and Brazil also highlight the need to develop “a more effective debt crisis resolution mechanism”. Mexico supports the establishment of an automatic mechanism to suspend debt service after “natural disasters”. Other countries, including creditors like Spain, Norway, and Germany, support specific reforms on domestic  legislation, climate resilient debt clauses, responsible lending and borrowing principles, or debt transparency.