"Our assumption that the old debt was settled is usually based on the factT
that we have taken up a new loan of much higher value..."
D. Ricardo "Experience of funded lending system"

 

Following the breakdown of the Soviet Union, the Newly Independent States, formally pursuing policies of market-oriented reforms, have faced serious problems related to disintegration of the former economic institutions with a chaotic formation of the new ones. The last decade was marked by crises of varying degrees and durations experienced by the national economies. Their expectations of help from multilateral financial organizations and some donor countries can be viewed as a natural attempt to find a way out of the crises.

Under pressure and control of multilateral financial organizations (dominated by the IMF and World Bank), the NIS have undertaken traditional market reforms, including financial stabilization; corporatization and privatization; liberalization of prices; liberalization of foreign economic activity; securing convertibility of national currency; etc.

Supporting actions of the International Monetary Fund, the World Bank and a number of other multilateral financial organizations and donor countries has resulted in a temporary stabilization of the national budgets and currencies and has helped mitigate the inflation processes. However, the practical implementation of the market reforms has been inadequate in terms of addressing the local realities such as the national political systems, existing economic environments, legal frameworks, attitudes and mentalities of the communities, etc. Developers of the reforms have also failed to support them by clear assessments of the time frames needed for the anticipated changes and effective implementation mechanisms, as well as have completely ignored social aspects of the reforms. Moreover, the loans have quite often been used for non-eligible purposes. As a result, the foreign financial support has been not as effective in controlling the inflation potential than in contributing to the instability of the national budgets and local currencies.

It became clear in the mid-90ies that the market reforms were associated with certain social costs, including growing unemployment rates, persistent decline of real residential incomes, shrinking volumes and contents of the consumer baskets, sagging quality and range of the free social benefits, increasing gender inequality on the labour markets, growing inequality of incomes associated with social tension in the communities, etc.

As things now stand, one of the most notable negative outcomes of this active foreign borrowing-and-investment policy is that most of the NIS has developed "perpetually indebted" economies that are largely dependent on regular foreign financial injections needed in growing volumes. In view of the inefficient financial management of the foreign loans, the debt repayment is becoming increasingly difficult, as it requires more and more allocations from the national budgets.

Loan agreements are formed on governmental level, and the governments are supposed to bear prime responsibility for the loan repayment. However, the resources needed to repay the loans are always allocated from consolidated funds, which are public resources in fact. Therefore, the burden of loan repayment is actually borne by the country residents who pay taxes to the budget. Debt restructuring agreements, as a rule, offer no remedy for the debt-related problems, but only provide some delays in payments thereby passing the burden of debts to the generations to come, while total amounts of payments increase with time through accumulation of interest on the loans.

External debt repayment in the NIS is associated with growing internal debts.

Back wages have become a common problem and usual practice. Problems related to back wages are particularly acute now in Baltic states, Russia, Ukraine, and all economies of Central Asian region.

 

Wage arrears that may be reasonably considered a direct violation of human rights account for the growing poverty among the population, restriction of public access to the common public goods and benefits, devaluation of social importance of professional labour and, eventually, in the lack of civil society confidence in the government.

  Back wages are most typical of the sectors with traditional domination of women’s labour, such as light industry, health sector, education and culture. In view of the fact that women's wages in the NIS in the period of economic and social reforms average 55% to 70% of the men's wages, the mounting back wages further brutalise the existing discrimination of women in the economic sector.

  Compared with men, women are more vulnerable as far as the negative impacts of the ongoing economic reforms are concerned. The external and internal governmental debts of the NIS have intensified the existing gender inequality both in the social and economic sectors.

 

·         Economic sectors with the highest proportions of women's labour (textile industry, medical services, educational sector) show the highest unemployment rates.

·         Unemployed women have less chance to find a job than unemployed men.

·         Despite the relatively higher education, women have largely been forced out of the market of stable and well-paid jobs.

·         Women of the most active age category (30 to 49 years of age) having a special professional education comprise the majority of street merchants.

·         The proportion of women in business is by far lower than that for men. Normally, women willing to start up their business are short of start-up capital and protection of the top of power. Businesswomen who had to quit their businesses report having serious problems trying to keep afloat in the extremely corrupt environment of the transitional economy.

·         Female workers dominate among those employed in the subsidiary farming sector poorly supplied with machinery and equipment though accounting for 1/3 of the average household income at present.

·         Women have to spend much time hunting the cheapest foodstuffs. On average, each woman carries loads of 3 to 4 kilograms per day that amount to 1000 kilogram per year.

·         Women cannot afford many consumer services, as they are too expensive for them. Only 2% of women report using laundry service; only 6% use dry cleaning service; and only 6% can afford buying convenience foodstuffs. This actually means that virtually all household work is being done by women.

·         Social benefits for women having children and for disabled and retired women are by far lower than the official survival minimum level.

·         The proportion of female public servants in the top government bodies is very limited that provides no means for their participation in economically important decision making process.

To secure the fundamentals of democracy and gender equality being implemented in the external and internal debt management practices, the following recommendations may be proposed:

·         A scope of authority of the government must be clearly identified and supported by the relevant legal provisions.

·         Every loan agreement of the government must be made transparent for the civil society. To secure this transparency, the government needs to specify and implement effective mechanisms of public participation in the decision-making process, as well as put in place adequate reporting procedures to keep the taxpayers informed on the decisions.

·         Debt restructuring agreements may be formed only based on civil society awareness of and agreement on them.

·         The government should make allowance for possible social and gender impacts of the loan agreements.

·         The government must form an inter-sector agency with a fair representation of women that will be in charge of current matters of the governmental debt management process.