In application of the term sheet of the Debt service suspension Initiative (DSSI) also endorsed by the G20, the Paris Club recognized that Nepal is eligible to benefit from the initiative. Therefore, the representatives of the Paris Club Creditor Countries have accepted to provide to Nepal a time-bound suspension of debt service due from 1^st May to 31^st December 2020.

The Government of Nepal is committed to devote the resources freed by this initiative to increase spending in order to mitigate the health, economic and social impact of the COVID19-crisis. The Government of Nepal is also committed to seek from all its other bilateral official creditors a debt service treatment that is in line with the agreed term sheet.

This initiative will also contribute to help Nepal to improve debt transparency and debt management.

Paris Club creditors will continue to closely coordinate with other stakeholders in the implementation phase of this initiative, in particular when considering a possible extension of the suspension period.

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 participate in the reorganization of Nepal’s debt are the governments of Belgium, France, Japan and the Republic of Korea.

Observers to the agreement are representatives of the governments of Australia, Austria, Brazil, Canada, Denmark, Finland, Germany, Ireland, Israel, Italy, the Netherlands, Norway, the Russian Federation, Spain, Sweden, Switzerland, the United Kingdom and the United States of America.

Credit AdobeStock©baisa

In application of the term sheet of the Debt service suspension Initiative (DSSI) also endorsed by the G20, the Paris Club recognized that the Commonwealth of Dominica is eligible to benefit from the initiative. Therefore, the representatives of the Paris Club Creditor Countries have accepted to provide to the Commonwealth of Dominica a time-bound suspension of debt service due from 1^st May to 31^st December 2020.

The Government of the Commonwealth of Dominica is committed to devote the resources freed by this initiative to increase spending in order to mitigate the health, economic and social impact of the COVID19-crisis. The Government of the Commonwealth of Dominica is also committed to seek from all its other bilateral official creditors a debt service treatment that is in line with the agreed term sheet.

This initiative will also contribute to help the Commonwealth of Dominica to improve debt transparency and debt management.

Paris Club creditors will continue to closely coordinate with other stakeholders in the implementation phase of this initiative, in particular when considering a possible extension of the suspension period.

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 participate in the reorganization of the Commonwealth of Dominica’s debt are the governments of France and the United Kingdom.

Observers to the agreement are representatives of the governments of Australia, Austria, Belgium, Brazil, Canada, Denmark, Finland, Germany, Ireland, Israel, Italy, Japan, the Netherlands, Norway, the Russian Federation, Spain, Sweden, Switzerland, the Republic of Korea and the United States of America.

Credit AdobeStock©peterswelt.reisen

Paris and Washington D.C., April 30, 2020 - Delegates representing official and private creditors released the following joint statement after an extraordinary virtual meeting of the Paris Club and the Institute of International Finance (IIF) to discuss the Debt Service Suspension Initiative (DSSI) agreed by the G20 and the Paris Club:

“Following this week’s very productive discussion, the Paris Club and IIF have agreed to collaborate in support of the DSSI agreed by the G20 and the Paris Club; while noting the complexity of attaining debt service suspension in a short time frame, private creditor representatives expressed strong support for the initiative and are committed to explore how best to advance this initiative on comparable terms, upon the specific request of borrowing countries.”

As the economic shock of the COVID-19 pandemic unfolds, the situation is particularly dire for the poorest and least developed countries now facing acute healthcare and humanitarian challenges. Many have high external debt burdens that severely limit their fiscal policy space to respond to the crisis. The creditor base—including official bilateral and multilateral creditors as well as private sector lenders and bondholders—is now much more diverse, making creditor coordination more crucial. With global commodity prices near their lowest levels in almost 50 years and ongoing oil market turbulence, many of these countries are seeing export revenues plummet. 

Participants discussed the DSSI of April 15, 2020 agreed by the G20 and the Paris Club, including the proposed scope of countries, suspension period of May-December 2020, and provisions of the official creditors’ term sheet. Private sector creditors expressed deep appreciation for the challenges facing the most vulnerable countries, highlighting their commitment to work constructively to find ways to implement the initiative—while noting the constraints on private sector participation. Private sector creditors also reconfirmed their willingness—as noted in the IIF letter dated April 9, 2020 to the IMF, the World Bank, the OECD and the Paris Club—to work in the coming weeks on terms of reference for an effective voluntary private sector participation. There was broad agreement on the importance of active collaboration between official and private creditors on this vital initiative.

The meeting convened all 22 Paris Club official creditors to meet with over seventy representatives from the private sector.[1]

[1] Paris Club-IIF meetings, typically held annually, are designed to foster dialogue and cooperation among all creditors, official and private alike.  This extraordinary session represents the 20^th Paris Club-IIF meeting.

The representatives of the Paris Club creditor countries agreed on 31 March 2020 with the Government of the Federal Republic of Somalia to restructure its external public debt. This was the first ever “virtual” negotiating meeting of the Paris Club. The Paris Club congratulates Somalia for having reached its Decision Point under the enhanced initiative for the Heavily Indebted Poor Countries (enhanced HIPC Initiative) in March 2020.

This agreement was concluded under the so called “Cologne terms” designed by the Paris Club to provide interim debt relief as part of the HIPC Initiative. This leads to the immediate non-ODA debt cancellation of US$ 1.4 billion in debt owed by Somalia to Paris Club creditors.

Somalia is expected to reach its HIPC Completion Point by 31^st March 2023 or earlier and receive the remainder of the debt reduction envisioned under the enhanced HIPC Initiative already endorsed by the international community in 1999. On an exceptional basis, considering Somalia’s very limited capacity of payment, and provided that it continues to implement satisfactorily an IMF supported program, no payments are expected from Somalia until at least 31^st March 2024.

Several creditors intend on a bilateral basis to grant additional debt relief to Somalia beyond the terms set today in the Paris Club agreement.

Somalia is committed to devote the resources that otherwise would have gone to Paris Club creditors to priority investments, as identified in its ninth National Development Plan (NDP-9). Somalia is also committed to seek comparable debt relief from non-Paris Club creditors.

Representatives from Kuwait Fund for Development, Saudi Fund for Development and the Abu Dhabi Fund for Development also attended the meeting as observers. They expressed their support to the terms of the agreement between the Paris Club and the Government of Somalia and indicated their willingness to provide to Somalia comparable terms under the framework of Enhanced HIPC Initiative and in accordance with terms and conditions adopted by their respective Boards of Directors.

The representatives of the Paris Club members expressed their commitment to implement the final component of debt relief contemplated under the enhanced HIPC Initiative as soon as Somalia meets the conditions to reach the Completion. The IMF and the World Bank currently estimate that those creditors will then have delivered total debt relief of approximately US$ 1.7 billion (in net present value terms). This amount does not include additional efforts that Paris Club members intend to provide at completion point.

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 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 government of the Brazil, Canada, Finland, Korea, Sweden and Switzerland, as well as the International Monetary Fund, the International Development Association, the African Development Bank, the European Commission and the Secretariat of the UNCTAD. Kuwait, the Saudi Arabia and the United Arab Emirates also observed this reorganization

3. The delegation of Somalia was headed by Dr. Abdirahman D. BEILEH, Minister of Finance. The meeting was chaired by Mr. Guillaume CHABERT, Co Chairman of the Paris Club, Assistant Secretary at the Directorate-General of the Treasury of the French Ministry of Economy and Finance.

Technical notes

1. Somalia’s economic program is supported by a three year arrangement under the Poverty Reduction and Growth Facility and an Extended Fund Facility, both approved by the Board of the International Monetary Fund on 24 March 2020. Somalia reached the decision point under the enhanced Heavily Indebted Poor Countries (HIPC) Initiative in March 2020.

2. The stock of debt owed to Paris Club creditors and to participating non-Paris Club creditors as of 31^st October 2019 was estimated to be more than US$ 3.0 billion in nominal terms, of which more than 99% consisted of arrears and late interest.

3. The cut-off date (1^st October 1984 for Somalia) is defined when a debtor country first meets with Paris Club creditors. It is not changed in subsequent Paris Club treatments. In accordance with Paris Club rules, credits granted after this cut-off date are not subject to rescheduling or cancellation. In this case, on an exceptional basis, all these amounts were deferred until after 2024. The cut-off date is designed to protect credits granted by Paris Club creditors after this date. It therefore helps restore access to credit for debtor countries after a Paris Club treatment.

4. This agreement consolidates around US$ 2.7 billion, most of which is composed of arrears and late interests. It cancels a total of US$ 1.4 billion and reschedules around US$ 1.3 billion. These rescheduled amounts will be addressed for debt relief when Somalia reaches Completion Point.

5. On an exceptional basis, creditors have also agreed to defer until after 2024 the repayment of arrears accumulated by Somalia on short term and post cut-off date debts, the maturities falling due during the consolidation period under the post cut-off date debts as well as all moratorium interest due during the consolidation period on the rescheduled and deferred amounts.

Paris Club and the IIF: Discussion on debt vulnerabilities, sustainable financing and debt transparency

Paris, June 18, 2019 - Delegates representing official and private creditors participated to the 19th Annual Meeting of the Paris Club and the Institute of International Finance (IIF) to discuss debt vulnerabilities in emerging markets and developing countries. The meeting gathered all 22 Paris Club members, as well as the 3 ad hoc participants to the Paris Club (China, India and South Africa) and Saudi Arabia as the upcoming G20 Presidency. It also gathered more than fifty representatives from the private sector. The IMF and the World Bank also took part in this meeting. This annual meeting is a unique event designed to foster dialogue and cooperation between all creditors, official and private alike, and to reflect recent developments and longer-term trends in the field of sovereign debt.

Against the backdrop of growing concerns about rising public debt levels in several emerging and developing countries, combined with the increasing complexity of debt composition, official and private creditors exchanged views on debt vulnerabilities and perspectives for going forward. Notably, participants discussed the financial situation of countries in debt distress or with significant debt vulnerabilities in Latin America, Sub-Saharan Africa and Southern Asia.

Participants also discussed how to address the infrastructure gap in emerging markets and developing countries, and cover related financing needs, while keeping debt on a sustainable path. They also shared views on the use and features of climate-resilient debt instruments, which could provide debt service relief in countries regularly affected by natural disasters.

Finally, participants discussed ways of enhancing debt transparency to benefit lenders and borrowers alike and ultimately improve debt sustainability through sounder financing practices. In this context, the IMF reported on the implementation of the G20 Operational Guidelines for Sustainable Financing and the IIF presented its work on the Voluntary Principles for Debt Transparency, which was supported by the G20 in Fukuoka. These voluntary Principles provide a framework for private creditors to publicly disclose details on lending to low-income developing countries.