By David Lawder
WASHINGTON (Reuters) – As major debt-distressed countries and major creditors discussed ways to unlock faster debt relief on Friday, legislation under consideration in New York’s state legislature would push private sector creditors to participate, state lawmakers and non-profit groups say.
New York State Senator Brad Holyman-Sigal, a Democrat representing lower and parts of mid-town Manhattan, said he introduced companion legislation to the “New York Taxpayer and International Debt Crises Prevention Act” already under consideration in the state assembly.
The legislation would compel private sector creditors to participate in debt restructurings of distressed low- and middle-income countries on the same terms as official government creditors.
“As the financial capital of the world, New York has a critical role to play in addressing the crippling debt of other nations,” Hoylman-Sigal said in a statement, adding that the legislation “will help countries struggling to recover from challenges like climate change and COVID and better take care of their constituents.”
It also will help protect taxpayers by preventing defaults and economic collapse among many U.S. trading partners, which could help prevent spikes in import prices, he said.
The New York legislation could have a significant influence on the debt restructuring process as some 52% of private-sector held sovereign debt is under contract in New York state, said Eric LeCompte, executive of Jubilee USA Network, a faith-based non-profit group pushing for debt relief.
LeCompte said participation of the private sector creditors was critical, but they should not have “undue influence” in the process.
New York-based BlackRock and London-headquartered Standard Chartered were among private sector creditors participating in the first meeting of a new sovereign debt roundtable aimed at eliminating sticking points to debt restructurings.
“The bill is critical for many countries struggling with soaring poverty rates and debt crises that became worse during the pandemic,” LeCompte said in a statement.
U.S. Treasury Secretary Janet Yellen intends to press China and other creditors for faster progress on debt relief next week at a G20 finance leaders meeting in Bengaluru, India.
(Reporting by David Lawder; Editing by Chizu Nomiyama)