A/HRC/20/23 lenders intending to finance specific activities or projects in Borrower States to conduct a credible Human Rights Impact Assessment (HRIA) as a prerequisite to providing a new loan. Alternatively, lenders may request the national human rights institution of the Borrower State, if any, to conduct such assessment. 41. For the purposes of these principles, a HRIA is understood as a systematic process, undertaken by an independent body with the full and informed participation of affected communities, based on the normative framework for international human rights law, which aims to measure the impact of an activity or project on the realization of human rights. Loan negotiation and contracting 42. The negotiation process should be informed by the inputs previously gathered through consultations with all stakeholders, including affected communities and civil society organizations, both by borrowers and lenders as appropriate. 43. The key terms and conditions of loan agreements should be publicly disclosed by both borrowers and lenders. 44. Lenders who negotiate with officials of a Borrower State should recognize that the latter have a fiduciary duty to act in the best interest of their principal, namely, the Borrower State, which in turn represents its people in the international system. Similarly, borrowers should recognize that officials acting on behalf of a lender stand in a fiduciary relationship to the lender. The discharge of this fiduciary duty is typically governed by formal and substantive requirements prescribed by the law of the Borrower State. Legal authority to contract 45. The contracting of loans or other debt obligations should comply with the formal and substantive requirements which are prescribed by the applicable national laws and regulations of both the Borrower State and the Lender State (or, as the case may be, the State having jurisdiction over private lenders) or, in the case of an international financial institution, its articles of agreement or other similar constitutional instrument. In particular, any prior approval or authorization required by domestic law or regulation should be fully complied with. Use of loan funds 46. Except in the case of general-purpose borrowing, the additional funding made available through external loans should only be used for the activity or project for which it was originally contracted. 47. In addition, funds obtained through external loans should not be used to fund any activity or project that will contribute to or exacerbate violations of human rights, particularly economic, social and cultural rights. Debt servicing or repayment 48. Debtor States should ensure that their level of debt servicing is not so excessive or disproportionate relative to their financial capacity and other resources as to amount to a diversion of their resources away from the provision of social services to all persons living in their territory and under their jurisdiction, including those pertaining to economic, social and cultural rights. 49. Debtor States should use their financial resources optimally in order to realize all human rights. Excessive or disproportionate debt servicing that takes away financial resources meant for the realization of human rights should be adjusted or modified 16