Debt Management

AuthorPoornimah Devi Sookun
Pages63-71
CHAPTER 5
Debt Management
We recognise that the debt burden constitutes a major obstacle to allocating
resources to key socio-economic sectors in developing member countries.
Aso Rock Commonwealth Declaration on Development and Democracy,
Abuja, Nigeria, 2003
The lawsuits faced by HIPC countries highlight the difficulties they f ace caused by
debt. Most debt shocks are also the result of globalisation and developments in inter -
national financial policy. Public debt management is a way to make indebted coun-
tries less vulnerable to financial crisis and shocks in the inter national financial market.
This chapter looks at the ways in which a sovereign country interacts with the inter -
national market and can implement effective debt management at national level. A
sound debt management process is one which follows government policy and operates
within the right institutional and regulatory framework. Effective debt management
can stop unsustainable debt, and hence lawsuits by vulture funds.
Lawsuits brought by vulture funds are slowing down the progress made by many HIPC
countries in obtaining debt relief and achieving the MDGs, in spite of strong support
from the international financial institutions. One example is the recent case brought
against Liberia in the UK courts,47 where judgment was given against Liberia in the
sum of US$20m to be paid to the vulture fund creditors, Hamsah Investments and
Wall Capital Ltd. Liberia recently entered into an agreement with the World Bank to
buy back some of its commercial debt at a discounted rat e.
Litigation is of course a legal problem, but vulture fund lawsuits are nurtured by the
unsustainable debt positions of sovereign countries. The financial, economic and
political issues that determine a countr y’s debt position play a crucial role in
determin ing whether a lender will become dissatisfied and have recourse to a
vulture fund creditor.
An examination of the historical reasons for the rise of vulture funds (Chapter 1)
shows the opportunities for profit arising from indebted countries’ failure to repay
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