General Assembly Research Report



Commission: The Security Council

Agendum: Establishing Rules for the Payment of Member States’ Debts to the UN

Student Officer: Yung Ju Kim

Introduction

The world is now surrounded by various conflicts. Conflicts occur on national or international scale including solving barricades that limit LEDC's growth, terrorism, and other physical and psychological disagreements. In all conflicts, money is the fundamental support in solving these issues.

 

The United Nations (UN)'s budget relies to the continuous funding from the member states because UN charter prohibited the UN from borrowing from commercial institutions. Member state pays the amount equivalent to its financial conditions and its ability to pay. However, the balance has been inclined since only 100 out of 185 member states have paid their loans.

 

Billions of dollars have been used for peacekeeping operations in places like Afghanistan and Sudan, and the number of funded areas will continue to increase in the following years. On the other hand, many LEDCs are facing serious debt pressures from International Financial Institutions like the International Monetary Fund (IMF) and the World Bank. Recently, the IMF and the World Bank established debt relief for the HIPC member states with poverty reduction policies. However, this issue remains as a strong controversy.

HIPC member states are not the only one involved in the problem of debt payment. Countries especially the United States still owes the United Nations a total of $1.246 billion. However, these countries continue to dodge the payments of debt to the United Nations through the claims of the United States Congress.

 

Thus, improved rules for the payment of the member states debts to the UN are vital to improve the conditions of many countries and efficiently manage the United Nations' budget.

Definition of Key Terms

Debt Relief

The partial or total forgiveness of debt, or the slowing or stopping of debt growth, owed by individuals, corporations, or nations. Debt relief for heavily indebted and underdeveloped developing countries was the subject in the 1990s of a campaign by a broad coalition of development NGOs, Christian organizations and others, under the banner of Jubilee 2000. This campaign, involving, for example, demonstrations at the 1998 G8 meeting in Birmingham, was successful in pushing debt relief onto the agenda of Western governments and international organizations such as the International Monetary Fund and World Bank. Ultimately the Heavily Indebted Poor Countries (HIPC) initiative was launched to provide systematic debt relief for the poorest countries, whilst trying to ensure the money would be spent on poverty reduction.

Member States

Member States refers to the representatives of the United Nations comprised of 192 members.

LEDCs and HIPCs

Abbreviations for Less Economically Developed Countries and Heavily Indebted Poor Countries.

Debts

Debts mean the amount owed by to a person or an organization for money borrowed.

Loans

Loans refer to the system which a lender provides money to a borrower with interest.

Jubilee 2000

It was an international coalition movement in over 40 countries that called for cancellation of third world debt by the year 2000. The concept derives from the biblical idea of the year of Jubilee, the 50th year. In the Jubilee Year as quoted in Leviticus, those enslaved because of debts are freed, lands lost because of debt are returned, and community torn by inequality is restored. It aimed to wipe out $90billion of debt owed by the world's poorest nations, reducing the total to about $37billion.

Background Information

The HIPC was launched in 1996 by the International Monetary Fund (IMF) and the World Bank with aims to ensure that no poor country faces a debt burden it cannot manage. It is a group of 40 developing countries that are classified by the IMF and the World Bank, of which 32 countries with a 1993 GNP per capita or US$695 or less and 1993 present value of debt to exports higher than 220% or present value of debt to GNP higher than 80%.

The Initiative for the "Heavily Indebted Poor Countries" (HIPC Initiative) is designed to provide exceptional assistance to eligible countries following sound economic policies to help them reduce their external debt burden to sustainable levels. That is, to levels that will comfortably enable them to service their debt through export earnings, aid, and capital inflows. This assistance will entail a reduction in the net present value (NPV) of the future claims on the indebted country. Such assistance will help to provide the incentive for investment and broaden domestic support for policy reforms. 

Developing countries' debt is external debt incurred by the governments of Third World countries, generally in quantities beyond the governments' political ability to repay. "Unpayable debt" is a term used to describe external debt when the interest on the debt exceeds what the country's politicians think they can collect from taxpayers, based on the nation's Gross domestic product, thus preventing the debt from ever being repaid.

Much of the current levels of debt were amassed following the 1973 oil crisis. Increases in oil prices forced many poorer nations' governments to borrow heavily to purchase politically essential supplies. At the same time, OPEC funds deposited in western banks provided a ready source of funds for loans. While a proportion of borrowed funds went towards infrastructure and economic development financed by central governments, a proportion was lost to corruption and about one-fifth was spent on arms.

The causes of debt are a result of many factors, including:

. 1) The legacy of colonialism — for example, the developing countries’ debt is partly the result of the unjust transfer to them of the debts of the colonizing states, in billions of dollars, at very high interest rates.

. 2) Odious debt, whereby unjust debt is incurred as rich countries loaned dictators or other corrupt leaders when it was known that the money would be wasted. South Africa, for example shortly after freedom from Apartheid had to pay debts incurred by the apartheid regime. In effect, South Africans are paying for their own oppression.

. 3) Mismanaged spending and lending by the West in the 1960s and 70s

In effect, due to enormous debt repayments, the poor are somehow subsidizing the rich.

Additionally, the payments of debt of the member states owed to the United Nations are processed and managed by the Financial Resource Management Service (FRMS), and these payments have to be certified and approved before disbursement.

Major Countries and Organizations Involved

USA

The monetary relationship between the US and the UN had been claimed that the US owed money to the UN and has created a strong controversy in that the US has owed money to the UN; this situation ended up getting the International Court of Justice involved. The UN argues that the US has been using a large sector of the UN’s budget for peacekeeping operations and they delinquent $1.6 billion, while the US claims that calculating the forces they provided, the UN actually owes them the money.

Heavily Indebted Poor Countries (HIPCs) Member States

HIPC is comprised of 37 countries with serious poverty and debt conditions. The consequence might have resulted from various reasons. For example, loans or donations were wrongly distributed to the corrupted officials; as a result only a small sector was met to the poor. On the other hand, due to poorly planned projects and policies, large amount of money was wasted. Their exports are dependent on primary products and their prices are fluctuating due to the rising issues like food crisis. Under the high interest, they are under the strong pressure.

International Financial Institutions (mainly the IMF, the World Bank and African Development Bank)

International Financial Institutions are the main loaners to poor countries to support their development projects and government policies under the fixed interest. 18 countries’ debt owes to them and those countries’ financial conditions did not largely improve in the previous years. So, in collaboration with the G8s, international financial institutions have launched debt reschedule deals and poverty reduction policies to provide the HIPC members with fundamental bases.

The United Nations Economic Commission for Africa (UNECA)

UNECA is the United Nations Organization (UNO) which focuses on tackling economic issues facing Africa. The fundamental goal of the UNECA is to promote economic and social development of the member states, and international cooperation for Africa’s development. UNECA has taken an active role in meeting the Millennium Development Goals (MDG) on poverty reduction policies in regional and international scale.

Timeline of Events

1985: United States Congress first officially declines to allow the payment of the U.S. dues.

1996: The HIPC program was established by the World Bank and the IMF.

1998: The issue of debt relief was officially debated in the agenda of Western governments and international organizations like the IMF.

1999: In Helm-Biden legislation, United States pays $926 million in exchange for the reduction in the assessment rate ceiling from 25% to 22%.

1999: The IMF's Poverty Reduction and Growth Facility (PRGF) were created to provide long-term loans to world’s poorest countries.

2001-2005: G8 agrees to cancel the debt of the world’s poorest nations.

Relevant UN Treaties, Resolutions and Events

A/RES/51/164

Enhancing international cooperation towards a durable solution to the external debt problem of developing countries. Submitted on 26/02/1997.

A/63/68

Multi-year payment plans from the report of secretary general. Submitted on 24/03/2008.

A/63/412/ADD.3

Macroeconomic policy questions: External debt and development: Towards a durable solution to the debt problems of developing countries from the report of the 2nd committee of the general assembly, 63rd session. Submitted on 05/12/2008.

Previous Attempts to Solve the Issue

Heavily Indebted Poor Countries (HIPC) Initiative

HIPC Initiative is the only agreed framework which provides world’s poorest countries with debt relief. This was established by the collaboration with the World Bank and the IMF in 1996 with financial policies including Poverty Reduction Growth Facility (PRGF). Under the four steps, members are able to achieve inevitable debt relief.

In every stage, the nation must prepare the documents to reflect its progress. First, in order to qualify the eligibility to receive the program, the nation must agree only to focus on the International Development Association (IDA) which aims to reduce poverty and to boost economic growth by providing interest-free loans and other economical policies, and PRGF. Second, the government of the nation must establish a reform program supported by the IMF and/or the IDA. Third, (decision point) after the agreement of the IMF and the IDA to qualify the nation’s suitability of debt relief from the evaluation of PRGF and other IMF and/or IDA policies’ performance, actual debt relief programs are put into practice. Active contribution from the government and individuals are vital to meet the goal until the fixed date. Forth, (Completion point) the IDA and the IMF finalize the delivery of debt relief by discussing if the nation has met the requirements of the IDA and the IMF.

Overall, by the structured process of HIPC Initiative, it has been a great success for some countries including Kyrgyzstan which will reduce its debt by 28 percent and Tanzania which reduced its annual debt payment by $170 million. This net profit is used to improve people’s basic necessities such as electricity and accessibility to safe drinking water. HIPC Initiative has been modified for several times to increase its effectiveness including “topping up” method which will forgive increased external debt after the decision point. With the recent cancellation of debt for 19 of the world’s poorest countries and 21 countries reaching the completion point, debt relief program has been proven as a positive success.

However, despite of these successes, critics have criticized at HIPC Initiative’s failure to deliver the debt relief. In its policy and structure, HIPC Initiative has mainly focused on monetary improvements rather than meeting the social needs. There are several examples extracted from the current conditions of 8 African countries.

← The IMF and the IDA ’s guidelines are very challenging for many indebted countries in improving their economical conditions, for example, until the completion point, the nation must stay eligible to the IMF and/or IDA‘s requirements while it must carry its debt burdens.

← Not all countries are benefiting from HIPC Initiative and in some cases, it made the conditions of some worse. For example, Mozambique’s loan increased since the program was put into practice and Zambia spends most of its budget on debt services rather than health and education aspects.

← Three major indebted countries, Kenya, South Africa and Zimbabwe are not included in HIPC members.

← The World Bank and the IMF are not focusing on economic reforms, but are increasing their budget for further measures. Under the objective of the MDG to cut the levels of poverty in half by 2015, an active approach on existing measures are needed.

Possible Solutions

Further cancellation and reduction of debt of Heavily Indebted Countries (HIPCs)

For many HIPC member states, debt has been a barricade which obstructed them to improve their economic and social conditions. Recent cancellation of debt of 19 countries and 21 countries reaching the completion point of HIPC Initiative showed possibilities of debt relief. Thus, further cancellation and reduction of debt of HIPC members will help them accelerate towards full debt relief. So, HIPC members, financial institutions and other nations might consider taking these actions:

← Conversion of loans into long-term payments to provide member states with more time to solve the debt crisis.

← The IMF and the World Bank should administer progressive management of debt relief of member states through offering policies and projects.

← Regulating periodic meetings involving related nations and organizations to evaluate the current solution and to offer more effective solution.

Economic and social stabilization of indebted countries

In addition to debt relief strategies mentioned above, providing affected nations with economic and social stabilization will improve a nation’s ability to pay its debt by increasing its Gross National Product (GNP) and improving people’s quality of life. Thus, in collaboration with financial institutions, creditor countries and Non-Government Organizations (NGOs), they should provide nations suffering from debt crisis with financial assistance to improve their economic and social conditions:

← Supporting the implementation of economic and social reforms and poverty eradication policies to the least developed countries.

← Offering social safety nets to the vulnerable people with low income who are seriously affected by the implementation of economic reform programs.

← Offering policies and projects to attract regional and oversea investments.

← Enlarging number of donations in ways like establishing a public day to emphasize debt relief of third world countries, to be used on various projects.

← Further discussing the issue in the United Nations to form debt relief-affiliated treaties and conventions such as Rome Convention which enables farmers of the third world countries to sell their products in a higher price in oversea markets.

.

Bibliography

General Research

←

←

←

←

←

←

←

←

←

←

←



←

←

UN Resolutions and Treaties

←

←

←

................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download