The Paris Club is pleased to release its annual report for 2023, which highlights its main contributions and outcomes of the past year. This exercise is part of the Paris Club's commitment to greater transparency in its actions and work.

First, the report provides an overview of the current international sovereign debt environment. The successive shocks which have hit the global economy in recent years have continued to reverberate in 2023. However, the first few months of 2024 have also seen more positive developments, with a return of Eurobond issuances in Sub-Saharan Africa for the first time since April 2022, low-income country debt levels stabilizing, and a possible inflection point reached in the global interest rate cycle as markets expect rates to begin falling. The perspective of another major debt crisis is slowly receding but vigilance remains high – at a time when many borrowers have significant external repayments falling due, limited fiscal space and large investment needs.

Second, the report presents the ongoing cases from different perspectives – borrowers from Zambia and Ghana, Paris Club secretariat, Paris Club creditors (Japan and Italy in conversation with Brad Setser) and G20 creditors (China) and Paris Club Chair. It takes stock of the lessons learnt over the past four years and suggests avenues for improvement. The past few months has been productive for the official bilateral creditors and borrowers’ community, in light of the debt treatments agreed with Zambia, Ghana and Sri Lanka. Given the diversification of the sovereign debt landscape over the last few decades, this section reflects the strengthened coordination between the Paris Club and other creditors, in particular G20 non-Paris Club members, with whom the Paris Club has committed to implementing the Common Framework.

Finally, given its role in designing and negotiating debt treatments, the Paris Club is at the forefront of thinking and discussions on the major issues driving the international sovereign debt community. This third and final part of the annual report aims to illustrate how the Paris Club contributes to these debates on comparability of treatment, restructuring of domestic debts, the nexus between sovereign debt and climate vulnerability, data transparency, countries facing temporary liquidity problems, and more. This section presents various discussions the Paris Club participates to, including meetings of the Institute of International Finance (IIF); the Global Sovereign Debt Roundtable (GSDR) created at the initiative of the G20 Presidency, the IMF and the World Bank; the Paris Club's Paris Forum which addresses the most topical issues of the moment. The report also presents a contribution by the Finance Development Lab, whose first president and founder Professor Daniel Cohen passed away in August 2023.

Background notes

1. The Paris Club was formed in 1956. It is an informal group of official creditors whose role is to find coordinated and sustainable solutions to the payment difficulties experienced by borrower countries.

2. The 22 members of the Paris Club are: Australia, Austria, Belgium, Brazil, Canada, Denmark, Finland, France, Germany, Ireland, Israel, Italy, Japan, Korea, the Netherlands, Norway, Russian Federation, Spain, Sweden, Switzerland, the United Kingdom and the United States of America. South Africa has been a prospective member since 2022.

Credit Photo : @PBagein

PARIS FORUM: THE 11^TH ANNUAL CONFERENCE OF THE PARIS CLUB ADRESSES SUCESSFUL DEBT TREATMENTS FOR FUTURE INVESTMENT

The 11^th edition of the Paris Club annual meeting, known as the Paris Forum, took place on 26 June 2024, at the French Ministry for Economy, Finance and Industrial and Digital Sovereignty, with the support of the Brazilian Presidency of the G20.

The Forum is aimed at facilitating open discussions on debt challenges and share potential solutions to prevent and address debt crises in developing countries. This edition, titled Successful debt treatments for future investment, emphasized the link between concluding a debt treatment, which helps to restore macroeconomic stability, and the conditions for growth and development via new investment. It was an opportunity to reflect on the state of global sovereign debt issues, and the challenges faced by developing countries that have restructured their debt to be able to invest again in their future, to meet the challenges of sustainable development and continue the fight against climate change. A technical workshop has also been dedicated to the key principle of Comparability Treatment, which has kept creditors busy since 2023. This issue of Comparability of treatment is key to ensure a fair burden-sharing of efforts between public and private creditors.

The Paris Forum is a unique platform for exchanges among creditors (both public and private, Paris Club and other official creditors), borrowing countries, international institutions, researchers and NGOs on sovereign debt. The event also saw the participation of around twenty borrowing countries, represented by a dozen ministers, as well as academics, NGOs, and representatives from around thirty private sector organisations, mainly banks and asset managers exposed in frontier markets.

The Paris Club remains steadfast in its commitment to promoting sustainable debt practices and coordinated solutions in cases where debt treatments become necessary. This commitment will persist within various relevant fora, primarily within creditor committees, which are responsible for negotiating restructurings. As part of its unwavering commitment, the Paris Club will also continue to actively contribute to the work of the G20's International Financial Architecture Working Group.

In the margins of the Forum, the Co-chairs of the Committee of Public Creditors for Sri Lanka initiated the signature of the country's debt restructuring agreement, alongside China's Exim Bank own agreement with Sri Lanka, in support of the authorities' efforts.

Background notes

1. The Paris Club was formed in 1956. It is an informal group of official creditors whose role is to find coordinated and sustainable solutions to the payment difficulties experienced by borrower countries.

2. The 22 members of the Paris Club are: Australia, Austria, Belgium, Brazil, Canada, Denmark, Finland, France, Germany, Ireland, Israel, Italy, Japan, Korea, the Netherlands, Norway, Russian Federation, Spain, Sweden, Switzerland, the United Kingdom and the United States of America. South Africa has been a prospective member since 2022.

3. France, India and Japan co-chair the Committee of Public Creditors for Sri Lanka. The members of the Paris Club which are part of the Committee are Australia, Austria, Belgium, Canada, Denmark, France, Germany, Japan, Korea, the Netherlands, Russia, Spain, Sweden, the United Kingdom, the United States of America. The committee includes India and Hungary, in addition to the Paris Club creditors.

Credit @PBagein

THE PARIS CLUB REACHES CONSENSUS ON A DEBT CANCELLATION FOR SOMALIA UNDER THE ENHANCED HEAVILY INDEBTED POOR COUNTRIES INITIATIVE

The representatives of the Paris Club creditor countries met with representatives of the Government of the Federal Republic of Somalia on 13 March 2024 and reached consensus on a debt cancellation for the Federal Republic of Somalia following its Completion Point under the Enhanced Heavily Indebted Poor Countries (Enhanced HIPC) Initiative approval by the Executive Boards of the IMF and the World Bank in December 2023.

In order to contribute to restoring the debt sustainability of the Federal Republic of Somalia, Paris Club creditors committed to cancel USD 1.2 billion in nominal terms under the Enhanced HIPC Initiative framework. Creditors welcomed and supported the commitment of the Federal Republic of Somalia to seek a treatment at least as favourable from all its other official bilateral and external commercial creditors.

In addition, Paris Club creditors confirmed their willingness to grant additional debt cancellation on a voluntary and bilateral basis for an amount of USD 815 million.

The Paris Club consensus and the expected additional bilateral efforts would result in a reduction of more than USD 2.0 billion, representing 99% of the debt of the Federal Republic of Somalia owed to Paris Club members as of January 2023.

Paris Club creditors welcomed the Federal Republic of Somalia’s determination to continue to implement a comprehensive poverty reduction strategy and an ambitious economic reform program to create the foundations for sustainable, inclusive economic growth.

The Federal Republic of Somalia committed to use the fiscal space provided by this debt treatment for priority expenditure areas (health, education and basic infrastructure) identified in the country’s poverty reduction strategy.

Background notes

1. The Paris Club was formed in 1956. It is an informal group of official creditors whose role is to find coordinated and sustainable solutions to the payment difficulties experienced by borrower countries.

2. The members of the Paris Club which participated in the reorganization of the Federal Republic of Somalia’s debt were representatives of the Governments of Belgium, Denmark, France, Germany, Italy, Japan, the Netherlands, Norway, the Russian Federation, Spain, the United Kingdom and the United States of America.

Observers at the meeting were representatives of the Governments of Australia, Austria, Brazil, Canada, Finland, Ireland, Israel, Sweden and Switzerland, as well as of the International Monetary Fund (IMF), the International Development Association (IDA), the African Development Bank, the European Commission and the Organisation for Economic Cooperation and Development (OECD). Saudi Arabia also observed this meeting.

3. The delegation of the Federal Republic of Somalia was headed by H.E. Bihi Iman Egeh, Minister of Finance. The meeting was chaired by Mr. Bertrand Dumont, Chairman of the Paris Club and Director General of the Treasury and Mr. William Roos, Co Chairman of the Paris Club, Assistant Secretary at the Directorate-General of the Treasury of the French Ministry of Economy, Finance and Industrial and Digital Sovereignty.

4. Launched in 1996, the Heavily Indebted Poor Countries (HIPC) initiative is a global effort to alleviate the debt burden of the world’s poorest nations. As of January 2024, 36 out of 39 eligible countries had received USD 120 billion of debt relief from Paris Club creditors, other official creditors, commercial creditors and multilateral creditors under the initiative. Somalia will be the 37^th country to receive a debt cancellation from the Paris Club under the HIPC Initiative.

Technical notes

1. The Federal Republic of Somalia’s economic program is supported by a 3-year arrangement under the Extended Credit Facility approved by the Executive Board of the IMF on 19 December 2023.

2. The Federal Republic of Somalia’s public external debt was estimated to be USD 3.8 billion as of end-2022 (sources: IMF and IDA documents). The debt owed to Paris Club creditors was estimated to be USD 2.0 billion as of 1^st January 2023 (source: Paris Club).

3. IDA-administered EU loans are included in this treatment.

Credit AdobeStock©Susanne

STATEMENT

AGREEMENT IN PRINCIPLE BETWEEN THE OFFICIAL CREDITOR COMMITTEE AND SRI LANKA ON A DEBT RESTRUCTURING

November 29, 2023

Following the launch event in April 2023, 17 countries formally formed, on May 9, an Official Creditor Committee (OCC) co-chaired by India, Japan and France (as chair of the Paris Club) to respond to the Sri Lankan authorities’ request for a debt treatment. The committee includes India and Hungary in addition to Paris Club creditors. Since then, the OCC has engaged extensively with the Sri Lankan authorities, the IMF, the World Bank as well as China, and Sri Lanka’s private creditors.

The OCC and Sri Lanka agreed on the main parameters of a debt treatment consistent with those of the Extended Fund Facility (EFF) arrangement between Sri Lanka and the IMF. This agreement will allow the IMF staff to present to the IMF Executive Board the first review of Sri Lanka’s EFF arrangement and open the way for approval of the second disbursement under the arrangement. The OCC commends the Sri Lankan authorities for their continuous efforts in implementing the reforms necessary for their country’s return to a sustainable path.

The OCC stands ready and looks forward to formalizing this agreement in the coming weeks in a Memorandum of Understanding with the Sri Lankan authorities. The OCC expects other bilateral creditors to consent to sharing, in a transparent manner, the information necessary for the OCC to evaluate comparability of treatment regarding their own bilateral agreement. The OCC also expects that the Sri Lankan authorities will continue to engage with their private creditors to find as soon as possible an agreement on terms at least as favourable as the terms offered by the OCC.

These engagements will ensure that the overall debt treatment granted to Sri Lanka is consistent with the IMF program parameters.

Background notes

1. The Paris Club was formed in 1956. It is an informal group of official creditors whose role is to find coordinated and sustainable solutions to the payment difficulties experienced by borrower countries. The members of the Paris Club which are part of the Official Creditor Committee are representatives of countries with eligible claims on Sri Lanka: Australia, Austria, Belgium, Canada, Denmark, France, Germany, Japan, Korea, the Netherlands, Russia, Spain, Sweden, the United Kingdom, the United States of America.

2. Representatives of the International Monetary Fund and the Word Bank as well as China attend the OCC meetings. Other observers include the Asian Development Bank, Saudi Arabia and Iran.