October 21, 2015

If a credit from one sovereign to another were classified as a crime against humanity how would the IMF proceed?

Sir, in Venezuela going to the IMF for assistance, is such a hot potato that some might even be hauled in front of a court accused for antipatriotic behavior for even mentioning that possibility. But if at the end it has to go to the IMF, it is clear that Martin Wolf raises an extremely important issue, namely how the influence of some sovereign creditors could block constructive actions by the IMF to reach acceptable solutions. “Resist Russian blackmail over Ukraine’s debt” October 21.

And the same problem, of how to treat sovereign credits, would be present in any Sovereign Debt Restructuring Mechanism. It has no easy solution… and the perfect might well prove to be the enemy of the good.

That said, a sovereign should have the right to go in front of some international court, in order to at least have the chance of getting the debts it owes, including to other sovereigns, classified as derived from odious credit, if for instance there is sufficient proof that substantial corruption was involved when the debt was contracted… and that the creditor had or should have had sufficient knowledge about it.

In the case of the most egregious malfeasance, where it can be sufficiently evidenced that many humans are suffering as a direct consequence of a debt having been contracted, one should be able to have that debt qualified as an economic crime against humanity.

And if a debt owed by a sovereign to a sovereign were to be qualified as resulting from an economic crime against humanity, by for instance the International Criminal Court in Hague, how would then IMF proceed? I really do not know… I am just an economist.

@PerKurowski ©