Statement by Mr. Ahmad Naseem Warraich, Counsellor, on Agenda Item 17: Macroeconomic Policy Questions under its sub agenda Items (b): International Financial System and Development, and (c): External Debt Sustainability and Development (New York, 10 October 2011)

Mr Chairman,

We thank the Secretary General for his useful reports covering the two sub agenda items before us.

Pakistan associates itself with the statement made by the distinguished representative of Argentina on behalf of the Group of 77 and China. We would like to make some additional points in our national capacity.

Mr Chairman,

The global economy is not only passing through extremely difficult and challenging times but uncertainty about its future is also at an exceptionally high level. Some see the global economy as having entered “a dangerous phase”. The fragile and uneven recovery is being seen as “faltering”. We can overcome the prevailing economic turmoil only by taking bold and decisive actions.

Since a consensus has emerged that the financial market failure is responsible for our current economic problems, the need for the reform of the international financial system and architecture is well recognised. The political will to pursue such a reform is, however, lacking. The systemic issues, problems, and shortcomings of the international financial system, consequently, remain unresolved. In our view, the following aspects need attention to make the international financial system more legitimate and effective:

Mr Chairman,

According to Secretary-General’s report, the total external debt stock of developing countries by the end of 2009 was approximately 3.5 trillion US dollars and was projected to increase by 10% to reach 3.9 trillion US dollars in 2010. This is, undoubtedly unsustainable.

Pakistan has always accorded high priority to addressing the issue of unsustainable level of debt in developing countries. The current financial and economic crisis and high volatility in food and energy prices have further deepened the debt problems of poor countries. Even several advanced economies are facing problems of sovereign debt and creditworthiness. The need to find durable solutions to the debt problem, particularly of developing countries, has become more pronounced today than ever.

We share the view that the Heavily Indebted Poor Countries (HIPC) Initiative and Multilateral Debt Relief Initiative (MDRI) have been helpful in providing relief to the eligible countries. We, however, also agree with the suggestion contained in the report of the Secretary General on the sub agenda item that there is a need to consider seriously why these initiatives did not succeed in maintaining debt sustainability in these countries. In addition, we will argue that there also is a need to expand debt relief to cover those countries that needed it and were not part of HIPC and MDR initiatives.

Similarly, we believe that debt sustainability, both in terms of its definition and calculation, is critical to the whole debate surrounding debt relief. For this reason debt sustainability should be linked to a country’s capacity to achieve its national development goals including the Internationally Agreed Development Goals (IADGs).

Furthermore, we are of the view that increasing use of grants and concessional loans as the preferred modalities of financial support will help improve debt sustainability of developing countries. Grant assistance could be utilised to retire expensive debt.

Mr Chairman,

Pakistan believes that innovative thinking is essential to resolve debt problems of the developing world. Debt moratorium as well as enhanced debt relief mechanisms, debt restructuring and debt for development swaps could be considered along with feasibility of a more structured framework for international cooperation on debt matters.

It is essential to have more ambitious initiatives to solve the external debt problems of developing countries in an effective, equitable and development oriented manner, particularly of those hardest hit by the present crises. In this exercise, the United Nations, being the only universal body, must play a key role.

I thank you.