Domestic Debt: Do Not Push The Pain Further Onto Workers
The ITUC is calling for caution by the International Financial Institutions (IFIs) when looking at including domestic debt in restructuring deals with countries.
The statement on Domestic Debt Restructuring (DDR) has been produced in time for the key Global Sovereign Debt Roundtable (GSDR) on DDR organised by the IMF, to which the ITUC has been invited.
Domestic debt restructuring has the potential to inflict major social and economic costs on already-suffering workers. It threatens future growth prospects and erodes the social cohesion required for recovery. Workers are impacted when their savings and pension funds are threatened – especially because, unlike large external creditors, these are often the only financial buffers they possess.
Big external creditors, with no stake in the broader national economy, should not be able to push more of the burden of restructuring onto domestic creditors, but this is becoming more common. Workers in Sri Lanka and other countries are paying the price for this. To address this situation the ITUC is calling for:
- A careful, transparent and holistic assessment of the costs and benefits at stake for different parties when considering the inclusion of domestic debt in restructuring.
- A stronger policy framework for assessing and managing the trade-offs and difficulties of such a DDR where they are unavoidable, within democratic national processes that includes social dialogue with trade unions.
An improved approach must consider the unique position of workers as both wage-earners and as constrained investors, rather than simply following a mathematical formula or legal dictum.
ITUC Acting General Secretary Luc Triangle said: “We welcome the positive step by the IMF to include the ITUC in the GSDR discussions and we look forward to ensuring trade union positions are translated into concrete recommendations for adoption by decision-makers.
“However, the increasing complexity of debt restructuring discussions demonstrates the urgent need for new dialogues towards a comprehensive reform of the world’s sovereign debt architecture as laid out by the UN.
“We oppose any form of austerity, whether it is imposed by a restructuring deal or for any other reason. It is simply counterproductive for the good of working people, for the economic health of a country and too often it is the weakest who pay the highest price.”