New York state Assemblywoman Pat Fahy was joined by Capital Region clergy this week to introduce legislation that would require private creditors to join debt relief initiatives for poor nations at the same level as the U.S. government and public creditors.
Following the start of the pandemic, the G20 Conference in May 2020 created the Debt Services Suspension Initiative, or DSSI, that for a limited period suspended debt service payments to multilateral official creditors, like the World Bank and the International Monetary Fund, from the world’s poorest countries. It was meant to ease financial burdens and free up already scarce money to help mitigate the human economic impact of the COVID-19 crisis.
In November 2020, the G20 reached another agreement on a Common Framework for Debt Treatments, which provided debt relief from developed nations to developing nations in need. The United States’ ability to participate in such debt relief programs is funded by taxpayers. The agreement also stipulated that private creditors would have to provide comparable relief on the debt owed by the developing nations — like Chad, Ethiopia and Zambia — but did not clarify how to enforce it.
At the state Capitol Wednesday, Assemblywoman Fahy said the New York Taxpayer and International Debt Crises Protection Act would close that gap by ensuring private creditors participate alongside public creditors on comparable terms. The DSSI is set to expire at the end of the year if it is not once again extended, but the Common Framework does not.
“Nearly 52 percent of the international sovereign bonds are governed under New York State law. So, by amending New York law, as we try to move this bill, private creditors who are attempting to enforce their debts against these developing nations would not be able to recover a share greater than the public creditors. In other words, such as the U.S. government. So, it levels the playing field in effect and, again, it's all under this common framework. New York could play a pivotal leadership role in reducing the suffering of millions globally.”
Shortly after explaining the intent of the bill, the Capital Region Democrat joked, “I hope you’re still with me. I know this is complicated.”
Eric LeCompte is executive director of the Jubilee USA Network, a coalition of religious institutions and labor groups. He argues the bill would also help the United States, because the IMF says inequality is being driven by global debt.
“The problems that developing countries are facing, that emerging markets, middle-income countries are facing are also a part of the problems we're facing in the United States in terms of economic shocks and supply shocks. The reality in terms of the Trump administration and Biden administration continuing the bi- partisan calls for debt relief…it's more than just helping the most vulnerable people on Earth that we as the religious community deeply care about. It's also about protecting our investments.”
New Yorkers for Fiscal Fairness Executive Director Ron Deutsch says having spent time in Africa, he’s seen the problems that occur when governments are saddled with debt.
“And so many of our emerging countries are saddled with debt. Many are spending 25 percent of their revenue on debt service right now. And they are unable to take care of their citizens and spend the money they need on their citizens. So, that's a particular concern to me. You look at Ethiopia, Kenya, Somalia, people are dying every 48 seconds of hunger in those countries.”
Fahy says the Common Framework is not a new idea and has existed in other forms in the past.
“We know it worked. It was considered widely successful [in] addressing some of this international debt 20 years ago. This framework was set up a few years ago by the G20 and we think it makes sense, it has just not been enforced. We have the ability to enforce it and help with this stability.”
Fahy says New York remains the financial epicenter of the world, preventing multinational banks from simply moving to another state to avoid the fees. She added that rather than create more of a financial burden, the measure would protect New Yorkers from having to be at the front of the financial responsibility line.
The bill does not have a co-sponsor in the state Senate. New York’s legislative session begins in January.
