Ambassador of the Argentine Republic to Pakistan, Ivan Ivanissvich has advised Pakistan to continue with avoiding restructuring sovereign debt as whenever a country suffers from a debt crisis it has to face capital flight, fall in investments, small and medium-size enterprises disappear and face a vicious cycle of poverty.
"Do not put yourself in a situation where you have to restructure your sovereign debt. Do everything you can, not to default. Up till now, Pakistan has managed to avoid a similar situation and it should continue to do so", said Ivanissvich at a Public Talk on "Debt Restructuring in Developing Countries: The Case of Argentina 2001-2016," organized by the Institute of Strategic Studies Islamabad (ISSI) under its Ambassadors Platform series here Wednesday.
"Whenever a country suffers from a debt crisis it has to face capital flight, fall in investments, small and medium size enterprises disappear and face a vicious cycle of poverty, said Ivanissvich, adding that sovereign debt crisis touched each human being directly in Argentina, resulting in sharp drop in investment and subsequently job loses and increased poverty. Once debt crisis occur poverty doubles which means more people lose jobs, companies going bankrupt SMEs disappear," he added.
For many years Argentina remained outside the financial market. The lesson is that do not put yourself in a situations where you are restructuring sovereign debt. Pakistan has been able so far to avoid this kind of situations, said the ambassador, adding that poverty means, less jobs, less development and if there is less development, the inequality increase. Greater poverty and greater inequality have an impact on development and ultimately impacts on global economy.
Ivanissvich said that any debt crisis is a very harrowing experience. Though Argentina has faced a number of debt crises in the past, but the crisis in 2001 took fifteen years of negotiations, and finally came to an end after lengthy negotiations and huge forfeitures, in March 2016. The Ambassador described how his country managed to get out of the debt crunch.
Elaborating the negotiation strategy, Ambassador said it was to construct a relationship based on faith and credibility with the mediator on the basis of professional reliability and truth, focus on the excessive interests being applied and prove to reach a definitive agreement. He further said that the "NOs" which defined the negotiation are; no signature of any confidential agreement- transparency- um-mask the opponent strategy, not to accept payment in bonds-saving on additional 20 percent due to price difference, significant savings in time for negotiations and avoid acting without full knowledge of the mediator.
He stated that a primary lesson to be learnt from Argentina's case is that no country should put itself in a position where it has to restructure itself. He also forewarned that any debt crisis coupled with long and protracted negotiations have a negative impact on poverty which continues to occur even after the issue has been redressed.
He said had it not been for China and some emerging economies, the world would already have seen a major crisis in 2011. He laid emphasis on the fact that if more developing countries become emerging economies it will be better, and debt crises can be avoided.
Ambassador Khalid Mahmood, Chairman Board of Governors of ISSI said that Pakistan and Argentina have a long history of friendly ties and collaboration at all fora. For many years, both countries have been exchanging young diplomats for training.
Ambassador Mahmood stated that the subject of debt repayment is very important- in fact it is part of the Sustainable Development Goals (SDGs) 2030. He said that high and rising debt causes serious threat to an economy's development by creating uncertainty both within the country and abroad. He reiterated that defaulting on a debt should be avoided because it puts a country's security at risk and pointed out that the Argentinean experience is a superb case study, and that the international community should use it to set up proper guidelines for coping with the debt process.
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