The Loss of Sovereignty: How International Debt Relief Mechanisms Undermine Economic Self-Determination

Abstract

This article discusses the process that debtor countries go through in the two mechanisms created to work out solutions for their huge and unpayable external debts, namely, the Paris Club and the Heavily Indebted Poor Countries (HIPC) Initiative. As the international lending process is structured today, it is through these mechanisms that debtor countries obtain debt forgiveness, reduction or rescheduling. The absolute control of these two mechanisms by creditor countries will be examined, together with the crucial role reserved to the International Monetary Fund (IMF) as the final dispenser of the ‘stamp of approval’ whether debtor countries will ultimately get debt relief. Also, this article identifies the so-called ‘conditionalities’ that are attached to debt relief obtained through the Paris Club and HIPC Initiative. What sort of policy prescriptions, ‘structural adjustments’ or other domestic changes are being pushed through these mechanisms? And finally, this article examines how these conditionalities comport with the principle of economic self-determination of peoples that supposedly guarantees their right to pursue an independent process of economic development. Essentially, this article attempts to answer these questions: Are the Paris Club and HIPC mechanisms fundamentally at odds with economic self-determination? And more generally, are they respectful of the ‘rule of law’ in the international system?

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