New Framework: Rising Debt, Climate Vulnerabilities are a Global Responsibility
April 28, 2022
Trustees of the Principles Emphasize Need for Greater Public-Private Sector Dialogue
Washington, DC -- Against the backdrop of a sharp rise in public debt levels in emerging and developing economies—and the growing focus on climate vulnerabilities ahead of COP27—members of the Group of Trustees of the Principles for Stable Capital Flows and Fair Debt Restructuring met during the IMF/World Bank Spring Meetings to endorse the 2022 Update of the Principles.
Originally launched in 2004 and supported by the G20 (1), the Principles are voluntary guidelines developed by a collaborative working group with representatives of sovereign borrowers and their official and private creditors; the Institute of International Finance (IIF) acts as the group’s secretariat.
Following the IIF Global Debt and Financial Stability Roundtable on April 23, 2022, co-Chairs of the Group of Trustees François Villeroy de Galhau, Governor, Banque de France; Dr. Axel Weber, Chairman of the Board, the IIF; and Dr. Yi Gang, Governor, People's Bank of China, issued the following joint statement:
“At a time of heightened geopolitical risks, economic disruption and rising global interest rates, the double burden of high debt levels and climate vulnerabilities is particularly challenging for emerging and developing economies. As we seek a coordinated and effective global response to these challenges, public-private sector dialogue and cooperation through forums such as the Group of Trustees of the Principles for Stable Capital Flows and Fair Debt Restructuring is more important than ever. Amid ongoing initiatives to enhance the international sovereign debt architecture, regular and frank dialogue with all stakeholders—including official, multilateral and private creditors as well as borrowing countries—is essential, as noted in the updated recommendations of the Principles.”
With guidance from the Group of Trustees, the Principles Consultative Group has consulted extensively with the G20, the international financial institutions, borrowing countries and a broad range of official and private creditors and borrowing countries to revise the Principles, with a view to reflecting significant changes in sovereign debt markets over the past decade. The Update focuses on the implications of much higher debt levels, greater diversity of the creditor base and debt instruments, the rise of ESG investing and lessons from recent debt restructurings. The recommendations provide enhanced market-based best practices for sovereign debt crisis prevention and resolution, including full support for debt transparency in line with the IIF Voluntary Principles for Debt Transparency. The IIF is pleased to be partnering with the OECD to operationalize these principles; effective implementation will require the full support of borrowing countries, official and multilateral creditors as well as continued support from the private sector.
Given the transformative potential of ESG investment in supporting stable capital flows and sustainable development goals, the updated Principles underscore the importance of integrating ESG considerations in borrowing countries’ policy frameworks, alongside enhanced debt transparency and reporting—including verifiable impact assessment.
About the Group of Trustees
The Group of Trustees is the guardian of the Principles for Stable Capital Flows and Fair Debt Restructuring and it oversees the work of the Principles Consultative Group (PCG). It consists of current and former leaders in global finance with exceptional experience and credibility. The Group of Trustees meets once a year to review progress on implementation of the Principles within the framework of the international financial architecture and to review the implementation of the Principles as provided for in the Annual Report on the Implementation of the Principles.
About the Institute of International Finance (IIF)
The Institute of International Finance (IIF) is the global association of the financial industry, with more than 400 members from more than 70 countries. Its mission is to support the financial industry in the prudent management of risks; to develop sound industry practices; and to advocate for regulatory, financial and economic policies that are in the broad interests of its members and foster global financial stability and sustainable economic growth. IIF members include commercial and investment banks, asset managers, insurance companies, sovereign wealth funds, hedge funds, central banks and development banks. To learn more about IIF, please visit www.iif.com, follow us on Twitter, LinkedIn or YouTube, or check out IIF’s podcasts.
1 In its Berlin Communiqué in autumn 2004, the G20 welcomed the Principles and conveyed its general support.