Bill Can Ease Global Supply Shocks and Help Vulnerable People Weather Pandemic and Ukraine Economic Shocks
A New York State Assembly bill requires private creditors to join debt relief initiatives for developing nations struggling with debt crises, the pandemic and Ukraine war-related economic shocks. The New York Taxpayer and International Debt Crises Protection Act, was introduced in May by Assemblymember Patricia Fahy, Chair of the Banks Committee.
“This legislation will help resolve debt in developing countries more easily, many of whom are reeling from the effects of the COVID-19 pandemic and Ukraine invasion,” said Fahy. “I’m proud to introduce this legislation and require that private creditors join in debt relief funding deals for developing countries to resolve financial and debt crises. While you might not know it, most of the world’s private debt is arbitrated here in New York, and this legislation will provide much needed debt relief across the board.”
Over 50% of the world's debt held by private creditors is contracted under New York State law. Fahy's bill ensures private creditors participate in debt relief initiatives at the same level as the US government, other governments and other creditors.
In the first year of the pandemic, developing country debt rose by five times the average increase of previous years. Under the leadership of the Trump and Biden Administrations, G20 countries established a process that allows up to 73 of the world’s poorest countries to obtain debt relief from all creditors. Although the G20 and US government were clear that private creditors should provide debt relief, private creditors have not announced any debt relief agreements to date.
Treasury Secretary Janet Yellen and the IMF consider pandemic-related economic disruptions are partly responsible for record-high inflation in the US. Supporters of the legislation assert that US and New York residents benefit from the bill.
“People living in New York and across the United States face supply shocks and health risks because of crises in developing countries,” said Eric LeCompte, Executive Director of the religious development coalition Jubilee USA Network. LeCompte's bipartisan organization won numerous global debt relief agreements over the group's 25 year history. “Other countries whose courts settle debt disputes should follow Assemblymember Fahy’s leadership and implement similar critical initiatives.”
While the majority of the world's private sector and bank debt is contracted under New York law, more than 40% is contracted under United Kingdom laws. The remaining portion is mostly held by Germany, France, Japan, Singapore, Belgium and Australia.
"This New York State bill is modeled after highly successful legislation in the UK, to ensure that taxpayer money sent to feed the hungry is not diverted to pay creditors," said Georgetown Law professor Anna Gelpern, who participated in discussions on this legislation. "The new law would be an important addition to the crisis management toolkit at a time when debts in countries are at critical levels, and governments are struggling to meet their citizens' basic human needs. A transparent, coordinated, equitable debt resolution process is essential to get us through this period."
View the NY Taxpayer and International Debt Crisis Protection Act and bill memo here.
Read Jubilee USA's press release on the introduction of the bill here.