FIRST DAY-NOVEMBER 17, 2003

09:00-10.00

His Excellency K.Y. Amoako, Executive Secretary, Economic Commission for Africa and Under-Secretary General of the United Nations
Professor Wiseman Nkhulu, Chairman NEPAD Steering Committee
His Excellency Alpha Omar Konaré, President of the African Union Commission
His Excellency Abdoulaye Wade, President of the Republic of Senegal

Session 1: Legal Aspects of External Debt Management

The legal aspects of external debt can be an important factor in reducing the debt burden of African countries. For instance, many African countries are servicing debts incurred by rulers who borrowed without the people's consent and used the funds either to repress the people or for personal gain. The legal doctrine of odious debt holds that successor governments should not be liable for debts. . The doctrine of odious debt originated in 1898 after the Spanish-American War when the United States argued that neither it nor Cuba should be held responsible for the debt the colonial rulers incurred without the consent of the Cuban people. How relevant is the legal doctrine of odious debt today? What mechanisms can be put in place to prevent odious debt from being incurred in the future? Proper attention to the legal details involved in entering into debt contract such as the appropriate contracting party for government debt, the equitable division of losses from state guaranteed private commercial debt, the invalidation of contracts following corrupt practices, the invalidation of contracts due to misrepresentation and the effectiveness of arbitration procedures can play an important role in encouraging greater transparency and accountability by both contracting parties and ultimately a lower debt burden for African countries.

Lunchtime Talk

Towards debt sustainability

The way in which debt sustainability is defined and how the definition is applied in practice is at the heart of all the proposals that have been put forward to deal with the external debt of low-income countries. Specifically, sustainable debt is defined by the International Monetary Fund "as a situation in which a country has the capacity to meet its present and future debt-service obligations without requiring a major correction in its balance of income and expenditure". The HIPC initiative incorporates a definition of debt sustainability based on the Net Present Value (NPV) of external debt-to-exports ratio as the primary indicator and on threshold levels that are uniformly applied across all countries. These indicators have been questioned on several grounds: Are they the correct choice of indicators of sustainability? Is the definition of threshold values realistic? Is the design of stress tests and of tools to deal with the uncertainly regarding the timing and magnitude of economic shocks adequate? Hence, the long debate over the most appropriate criteria to use to judge whether the debt of developing countries is sustainable is still not resolved. This session will examine various proposals on debt sustainability and come up with the most appropriate criteria to judge whether the debt of African countries is sustainable.

SECOND DAY-NOVEMBER 18, 2003

Any consideration of Africa's financing needs and prospects for debt relief needs to be put in the wider context of financing for development. This is because debt relief on its own will be woefully insufficient to allow African countries to finance the Millennium Development Goals (MDGs) and achieve long-term debt sustainability. Overall, a working target of US$50B seems necessary if the MDGs are to be realized. This raises the issue of additional transfers needed, and how such extra support may be found and absorbed. Concerns persist about the terms on which support should be transferred, including the role of conditionality, quality of aid and the balance between grants and loans. This session will come up with concrete proposals on how to increase the quantity and quality of development financing, in particular on options available to multilateral institutions to increase financing for debt relief.

Many African countries depend on a few primary commodities for their export earnings. For example, the share of commodities in the total merchandise export earnings of HIPCs averages about 84%. And about 15 HIPC countries generate more than 90% of their export earnings from a few commodities like coffee and cocoa. Primary commodities are subject to extreme price volatility. In addition, there has been a secular downward trend in commodity prices for a considerable period of time. Unstable export earnings caused by export price volatility and deteriorated terms of trade, in turn, lead to instability of government revenues and debt sustainability. Thus such export price fluctuations are considered to be at the heart of many African countries' failure to exit the debt trap. Over the past half century, the international community has introduced several stabilization and compensatory mechanisms to minimize the impact of price fluctuations. These initiatives have either not been able to provide adequate assistance or simply proved financially unsustainable. As such, rapid and proportionate support to affected countries has diminished over time, and there is now little effective protection. Hence, the need to find ways to minimize the impact of commodity price shocks remains as great as ever today. The session will come up with proposals for African countries to mitigate impacts of commodity shocks.

Concluding Session
A Lasting Solution to Africa's External Debt: The Way Forward

His Excellency, Abdoulaye Wade, President of Senegal

His Excellency, K.Y. Amoako, Executive Secretary, Economic Commission for Africa and Under-Secretary General, United Nations.