PARIS CLUB

1. Context

2. About Paris Club

• The Paris Club is a group of mostly western creditor countries that grew from a 1956 meeting in which Argentina agreed to meet its public creditors in Paris.
• Their objective is to find sustainable debt-relief solutions for countries that are unable to repay their bilateral loans.
• It describes itself as a forum where official creditors meet to solve payment difficulties faced by debtor countries.
• All 22 are members of the group called Organization for Economic Co-operation and Development (OECD).
• Other creditor nations are allowed to participate in negotiation meetings on a case-by-case basis if they meet certain conditions.
• The members meet in Paris once a month except for February and August.
• Each meeting includes a one-day ‘Tour horizon, during which creditors talk about the external debt situation of debtor nations or issues regarding how those countries are managing their debts.
• The Paris Club invites debtor nations to a meeting with its creditors after it has concluded an appropriate program with the IMF (International Monetary Fund) that shows that the country cannot meet its external debt obligations, and therefore requires a new payment arrangement with its foreign creditors.
• Representatives of the World Bank, the IMF, and other international institutions, plus the relevant regional development bank, may also attend the meeting as observers.
• The debtor country’s representative is usually its Minister of Finance, who heads a team comprising officials from his or her ministry and the central bank.
• The members are Australia, Belgium, Canada, Denmark, Finland, France, Germany, Ireland, Israel, Japan, Netherlands, Norway, Russia, South Korea, Spain, Sweden, Switzerland, the United Kingdom, and the United States.

3. How has Paris Club been involved in debt agreements?

• According to the information on its website, since its beginning, the Paris Club has reached 478 agreements with 102 different debtors countries. Since 1956, the debt treated in the framework of the Paris Club agreement amounts to $ 614 billion.
• It operated on the principles of consensus and solidarity. Any agreement reached with the debtor country will apply equally to all its Paris Club creditors.
• A debtor country that signs an agreement with its Paris Club creditors, should not then accept from its non-Paris Club commercial and bilateral creditors such terms of treatment of its debt that are less favorable to the debtor than those agreed with the Paris Club.
• The Paris group countries dominated bilateral lending in the last century, but their importance has reduced over the last two decades or so with the emergence of China as the world's biggest bilateral lender.
• In Sri Lanka's case, for instance, China, Japan, and India are the largest bilateral creditors. Sri Lanka's debt to China is 52 percent of its bilateral debt, 19.5 percent to Japan, and 12 percent to India. With Japan a member of the Paris Club, Sri Lanka needed assurances from China and India as well.

• The Paris group countries dominated bilateral lending in the last century, but their importance has receded over the last two decades or so with the emergence of China as the world’s biggest bilateral lender
• In Sri Lanka’s case, for instance, China, Japan and India are the largest bilateral creditors
• Sri Lanka’s debt to China is 52 per cent of its bilateral debt, 19.5 per cent to Japan, and 12 per cent to India
• With Japan, a member of the Paris Club, Sri Lanka needed assurances from China and India as well
• The Paris Club had tried to get both countries on board a centralised effort, but Delhi launched its own bilateral negotiations with Colombo
• The reported readiness by the Paris Club comes against this background. That still leaves China, whose Exim Bank offered a two-year moratorium on its loans soon after the Indian announcement