Sovereign Debt Restructuring: Human Rights Implications

Ms. Salamah Ansari

Over the past decades, the international community has undertaken numerous multilateral initiatives for debt relief to reduce the crippling debt burden of a growing number of countries. Several proposals have been tabled and umpteen efforts made to devise schemes for systematically restructuring sovereign debt. Several reports by the United Nations and international human rights instruments have affirmed time and again in relevant documents that there is a close relationship between macroeconomic and social conditions, with external debt. The direct linkage between debt and human rights has been iterated in the fundamental postulates elaborated in the Guiding Principles on Foreign Debt and Human Rights (by the U.N. Human Rights Council). The Principles on Promoting Responsible Sovereign Lending and Borrowing have been validated by the UNGA Resolution: Basic Principles on Sovereign Debt Restructuring Processes (A/69/L.84). This paper is aimed at discussing the link between human rights and external debt from a developing country’s perspective. Hence, building upon relevant UN reports and policy documents the analysis treats foreign debt as a human rights problem. Notwithstanding the linkage between unsustainable external debt and the fulfillment of human rights of citizens, majority of the institutional efforts are all market based and incorporate only economic concerns missing out on the human rights of millions. This discussion then reveals the negligible representation of non- economic factors on the unsustainable debt and its restructuring has far-reaching concerns for the indebted sovereign and consequences for its population. As a response to the limitations of the current market based contractual approach for restructuring sovereign debt, this segment advances the need for a human rights-based approach to sovereign debt restructuring. This is proposed to discourage undermining the sovereign prerogative to govern national development strategies. This segment provides an analysis of the effects of constricting the right of a sovereign State to restructure its external debt on the enjoyment of human rights of the citizens of that country.