Keeping an eye on the money we don’t have. Parliament’s oversight role on public debt
Always be prepared for the next crisis. It seems that public debt spiraling out of control is on track to becoming the next global crisis.
National economies might collapse, as we have seen recently in Sri Lanka.
But it is not all doom and gloom. There are ways to conduct public debt management in a responsible and accountable way. While public debt has traditionally been managed by the Ministry of Finance and executive agencies, there is increasing recognition of the unique roles for parliament in the governance of public debt. Parliaments are increasingly taking on this challenge, as we have seen in – for instance – Kenya, Zambia, Georgia, the Maldives, and the Caribbean.
UK’s international development policies can be strengthened by including a public debt accountability lens through an enhanced role for parliaments in oversight of public debt. There are six incentives as to why
These six arguments for parliamentary involvement in public debt management should incentivise the UK and others making parliamentary oversight on public debt management one of the criteria for their debt relief schemes. Strengthening the governance and domestic accountability in debt relief schemes will contribute to prudent debt management and more sustainable economies.
percent of low-income developing countries have never published public debt data or have not updated information in the past couple of years, and lenders such as China apply strict nondisclosure clauses.
The briefs explain that, while most countries do have a financial administration act, far fewer countries have specific public debt legislation in place. Setting a legal framework for public debt management is one of parliament’s key tasks. The briefs outline best practices in the implementation and monitoring of a legal debt framework and the ratification of loan agreements. Beyond parliament’s legislative role, the briefs also cover parliament’s oversight role of public debt, and oversight over public debt in emergency contexts. The way how public debt was managed during the COVID-19 crisis has informed the brief on emergency context, though it is applicable to other potential future emergencies as well.
In conclusion, it is worth mentioning that parliament’s capacity to oversee public debt management is very much linked to the depth of parliamentary scrutiny throughout the budget cycle, the resources available to committees, parliament’s oversight practices in general, and its ability to work collaboratively with civil society to enhance the political space to upscale transparency.
Solid and accountable public debt management is not only the task of the government borrowing money. It is also a responsibility of the lenders -- lending countries and lending international institutions -- to ensure due diligence of the viability of the economic projects and of the rationale underpinning borrowing requests. Hence, the current initiative of revitalizing the UNCTAD principles on the promotion of sovereign lending and borrowing cannot be timelier and will hopefully contribute to avoiding a next global crisis of public debt spiraling out of control.
Franklin De Vrieze,
Head of Practice Accountability, Westminster Foundation for Democracy.