Ms Nessa Ní Chasaide:

We thank the Chairman and committee members for inviting us and giving us this opportunity to present on the critical question of international debt and the role of the international financial institutions. We submitted a briefing document to committee members in advance of the hearing, to which we will speak in our presentation. We would like to prioritise four key issues that are of serious concern to the Debt and Development Coalition. First, we will outline the debt distress levels of global south countries, current trends in public sector lending and the role of new, unregulated actors in countries of the global south. I will then hand over to my colleague, Ms O'Neill, who will speak about specific countries and regions of concern with high debt distress levels. She will also speak to the question of the International Finance Corporation of the World Bank Group and about our specific human rights concerns regarding its conduct. She will speak about the connections between international debt and tax justice which we see as deeply interconnected questions if countries of the global south are to get away from their high levels of debt dependency.

I will give an overview of current trends in global south countries regarding sovereign debt. The World Bank's international debt statistics which were released last month and are the most up-to-date figures we have show that the debt stock of southern countries increased by $400 billion in 2012 and stands at just under $5 trillion. This is the most significant deterioration in southern countries' debt dynamics since the early 2000s. As many committee members know, 39 countries in the global south have qualified for debt cancellation through the existing multilateral debt relief scheme, the so-called HIPC, heavily indebted poor countries, scheme. We believe the scheme did not go far enough as it excluded many countries, about which Ms O'Neill will speak, that are still in need of debt cancellation. It also caused serious damage to many participating countries through the policy conditions attached to it. Some 36 of the 39 countries that qualified have so far received debt relief, the vast majority of which are in Africa. The debt cancellation is worth over $100 billion in contributions from public sector lenders. There is an additional debt cancellation committed to by the private sector.

The World Bank's figures show that the problem of global south debt is far from over. Most significantly, the figures show a rise in private sector lending to southern governments. The level of sovereign bond issuance by southern governments rose by 30% above 2011 levels, with more countries of the global south issuing bonds, rather than borrowing from previously preferred private sector creditors, the foreign commercial banks.

According to the World Bank, private lenders provided 90% of new debt to southern countries in 2012, contributing to the very changed face of creditor influence in countries of the global south, which means a move away from more traditional lenders such as the World Bank. Debt and Development Coalition Ireland is concerned about these trends because, while private loans can be advantageous to governments as they do not come with intrusive policy conditions attached, they are more costly due to higher interest rates. In addition, as we in Ireland have learned to our great cost, debts to private bondholders can be extremely difficult to restructure in situations of debt crisis. Debt and Development Coalition Ireland is also concerned that this rise in indebtedness to the private sector by southern governments may be understated because there is no systematic collection of private debt data by the World Bank. The World Bank figures therefore provide an important and serious warning to governments throughout the world to act to reduce the debt dependency of southern governments, a dependency which, as we will see in the further issues we will raise, impacts negatively on their development policy options. The time for action in this policy area is now. As the new version of the millennium development goals is negotiated through the UN post-2015 process, and through the UN financing for development process, Ireland has an important opportunity to ensure this issue is central to discussions on financial policies towards southern nations.

We would like to highlight to the committee that the rise in southern government debt owed to the bond markets has opened up exposure to opportunistic actors, namely so called "vulture funds", which buy up distressed debt and then sue the sovereign government in question, often for exorbitant amounts of money. A case being heard in the New York courts, which is widely reported in the media, is causing significant international concern. This is the case of NML Capital against the Republic of Argentina, which involves a set of vulture funds suing the state of Argentina for more than $1 billion. A New York court of appeal found that these hedge funds should be treated on a more equal basis with other traditional creditors than would previously have been anticipated. This decision potentially sets a very dangerous precedent regarding the treatment of such opportunistic funds because the court ruling in its favour makes it more rational for bondholders to hold out in situations of debt restructuring. The government of Argentina is seeking to challenge this judgment in the US Supreme Court, a move which has gained support from the IMF and the US, French, Brazilian and Mexican governments.

Debt and Development Coalition Ireland believes there are broader policy concerns to be considered with regard to this case, and that in cases in which vulture funds sue a state for payment of distressed debts they must be forced to adhere to existing debt restructuring agreements and, crucially, assets must be put out of their reach. Legislation in this area is badly needed in jurisdictions where these funds operate. New legislation should build on laws recently put in place, for example in the UK and Belgium, which have sought to control such funds' behaviour by ensuring they cannot make financial claims beyond existing debt restructuring agreements relating to the countries being sued.

I will now hand over to my colleague, Ms O'Neill, who will speak on the next part of our presentation.