Club de Paris

The Paris Club welcomes India

On May 6^th 2019, the Paris Club held its regular monthly meeting, with India attending as an observer for the first time.

This participation is based on India’s decision to work with the Paris Club. At present, the Club has 22 full members in addition to China and South Africa who are participating in the work of Paris Club on an ad-hoc basis.

The Paris Club welcomes India’s decision. It reflects the continued efforts towards broader inclusion of emerging creditors, which started with Brazil and Korea becoming full members in 2016, after Israel in 2014. India’s decision supports the role of the Club as the principal international forum for restructuring bilateral official debt.

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pr_20190506-welcome_india.pdf

Event date:

Monday, 6 May, 2019 - 17:45

Paris Forum Workshop, Bali on 11 October 2018

Costs and benefits of collateralized sovereign debt

24 lending and borrowing countries and 4 international financial institutions and organizations gathered on October 11th, 2018 at the Paris Forum Workshop, which was held in Bali in the margins of the IMF and World Bank Annual Meetings, to discuss the costs and benefits of collateralized sovereign debt.

Recent developments regarding collateralized sovereign debt raised issues regarding its impact on debt sustainability and on debt restructuring. The Paris Forum Workshop’s goal was to analyze the cost and benefits of collateralized sovereign debt and discuss how to better take into account these debt instruments when assessing debt sustainability.

Collateralized sovereign debt may be seen by borrowing countries as an opportunity to fulfill development financing needs, as it can enhance credit access (when conventional financing is unavailable) and finance large capital expenditures. On the side of creditors, be them private or sovereign bilateral lenders, collateralized debt enhances their seniority as an asset securing the transaction - when economic conditions worsen, creditors are more likely to be paid than other conventional creditors.

However, in many cases, there is little evidence that collateralized debt brings more benefits than costs in the long term. Participants stressed during the workshop that these benefits may turn into risks and even imperil the borrowing country’s debt sustainability, especially when the level of collateralized debt is high:

Lenders tend to base their lending decision on the value of the collateral, rather than on the borrower’s financing capacity to service its debt. This may lead to overborrowing and delay economic adjustment until a debt restructuring becomes unavoidable.
These complex instruments might lead to “creative accounting” and misreporting of debt in the overall debt sustainability analysis.
In some borrowing countries, collateralized sovereign debt represent the larger share of the overall debt and sometimes of overall revenues, reducing the borrowing country policy flexibility by earmarking revenues or export earnings. It also encourages a “race to seniority” between lenders, while discouraging conventional borrowing. Some multilateral and official lenders have included a negative pledge clause in their contracts, which prevents a borrower from pledging any assets.
When a borrower’s debt is unsustainable and needs to be restructured, the resolution may be constrained i) as collateralized debt lenders consider themselves as more senior than conventional lenders, obscuring the creditor hierarchy and setting hurdles in burden sharing; ii) by the legal complexities that are often attached to the loan contract; iii) by the hidden debt that the borrowing country may have excluded from its balance sheet.

To deal with these challenges, participants highlighted the need to improve debt transparency and sustainable lending practices as little is known on the scale of collateralized debt in developing countries.

Participants agreed that sharing data is a first step, but it does not solve the race to seniority nor legal issues when it comes to debt restructuring. In a debt restructuring process, creditor coordination will be a key challenge to provide timely and orderly resolution of the debt crisis and ensuring fair burden-sharing among creditors.

Collateralized debt is a complex issue that need to be discussed in debt fora, and addressed by IFIs and the G20. The Paris Forum is committed to engage in deeper discussions on this matter during its next annual conference.

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Attachments:

Chairman Summary.pdf

Agenda.pdf

Event date:

Thursday, 20 December, 2018 - 11:15

Participation of the Paris Club in the Paris Peace Forum

Participation of the Paris Club in the Paris Peace Forum’s panel "Back to the future: Debt, a Returning challenge"

Odile Renaud-Basso, as Chair of the Paris Club, participated in a conference of the Paris Peace Forum on the challenges of sovereign debt, on 12 November 2018.

This session brought together various panelists: academics (Jean Pisani-Ferry and Yves Tiberghien), think tanks (Kenichiro Sasae of the Japan Institute of International Affairs), and international organizations (Hugh Bredenkamp of the IMF and Odile Renaud –Basso, Chair of the Paris Club).

The conference was designed to discuss sovereign debt issues in a context where the level and pace of debt growth in advanced economies and developing countries is a growing source of vulnerabilities. Several topics were discussed: debt dynamics in many developed countries following the financial crisis of 2007-2008 and vulnerabilities linked to external shocks such as interest rate shock, the reindebtedness of developing countries, despite the debt relief granted to the poorest countries in the years 1990-2000 (Heavily Indebted Poor Countries Initiative, HIPC); but also the situation of China, both a major emerging creditor and a dynamic borrower on the financial markets.

Odile Renaud-Basso explained the role of the Paris Club, the principal international forum for restructuring bilateral official debts. Its expertise in coordinating official creditors, built on 60 years of existence and more than 430 debt restructuring agreements, was highlighted. The flexibility of the Club and its relevance, including for non-Paris Club creditor countries, was underlined, as 35% of the Paris Club's debt treatments were concluded with non-member creditors. The Paris Club is also constantly evolving, with its enlargement to emerging creditors such Brazil and South Korea in 2016, and the regular participation of China and South Africa in some of his work. The Paris Club Chairperson emphasized the importance of the dialogue between all stakeholders on sovereign debt issues, highlighting the role played by the Paris Forum since 2013- a forum for dialogue between creditor and debtor countries alike- aiming at developing a common approach on sovereign debt issues and identifying good practices to prevent risks. For example, in 2016, the Paris Forum initiated the first definition of sustainable financing principles, which were then adopted by the G20 member countries in 2017, with the aim of enhancing transparency and sustainability of financings, and the coordination of sovereign creditors. The question of the implementation of these principles and the adoption of comparable best practices by private creditors are today an ongoing work in the G20 and in the Paris Club.

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Paris Peace Forum_Back to the future_2018 11 12

Attachments:

20181112_conference_peace_forum.pdf

Event date:

Monday, 12 November, 2018 - 16:30

Conference organized by the ODI on "Africa's rising debt"

Participation of the Paris Club Secretariat in the conference organized by the Overseas Development Institute (ODI) on “Africa’s rising debt”

Isabelle Bui, Secretary General of the Paris Club, was a panelist in the Sovereign Debt Restructuring session of the Conference “Africa’s rising debt” organized by the think tank Overseas Development Institute (ODI) on 6 November 2018, in London.

This session brought together speakers from international institutions (UN / UNCTAD, Paris Club), the private sector (Clifford Chance) and the civil society (NGO One).

In an evolving sovereign debt landscape, characterized by growing vulnerabilities in low-income countries, more diverse creditors and more complex instruments, the Paris Club highlighted during this conference the importance of deepening the coordination of official creditors, notably through the enlargement of the Paris Club to emerging creditors. It also recalled the importance of dialogue between all stakeholders encompassing creditor and debtor countries, to develop common analyzes of current risks and to prevent new crises, highlighting the work of the Paris Forum in this regards. This Forum initiated the first definition of the principles of sustainable financing in 2016, leading to their adoption in 2017 by the G20 countries. The implementation of these principles by all actors, official creditors, private creditors and borrowing countries must now be one of the priorities of the international community to reduce the risk of a new debt crisis in developing countries.

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Attachments:

20181106_conference_odi.pdf

Event date:

Tuesday, 6 November, 2018 - 11:30

6th Conference of the Paris Forum 2018

Paris Forum calls for improved debt transparency and sustainability

46 lending and borrowing countries, 9 international institutions, and representatives from civil society gathered on 21 June 2018 at the 6th Conference of the Paris Forum, of which the Chairman's Summary is now available.

Participants discussed how to prevent over-indebtedness of some developing countries, in a context of growing vulnerabilities due to the rise and changing composition of debt in these countries. All along the day, participants analyzed the underlying causes of these countries re-indebtedness to identify long-term operational solutions.

Recognizing the importance of financing needs to ensure a long-term development, participants exchanged their view on best lending and borrowing practices to provide for the financing of development without compromising debt sustainability of borrowing countries.

The shared responsibility of lenders and borrowers has been highlighted. "We, official lenders and borrowers, also private creditors: let us not forget that we share the same destiny. It is essential to find concrete mechanisms to ensure financing of development in a sustainable way”, stated Guillaume Chabert, Co-Chairman of the Paris Forum.

Debates touched on the implementation of existing initiatives in favour of sustainable financing, with specific focus on the G20 Operational Guidelines for Sustainable Financing and OECD Export Credits Recommendation on Sustainable Financing.

Participants also discussed in detail the best way to improve transparency on debt data. The need for capacity building to improve data collection and reporting, in many borrowing countries, but also in lending countries was underlined.

Finally, the conference was an opportunity to analyze particular schemes that could undermine the long-term debt sustainability of borrowing countries, including the issue of collateralized debt.

The 6^th annual conference of the Paris Forum gathered the Paris Club’s 22 permanent members, its ad hoc participant (China), G20 members (Argentina, India, Indonesia, Mexico and Saudi Arabia), members of the European Union (Czech Republic, Poland), and other creditor and borrowing countries (Cameroon, Chile, Colombia, Democratic Republic of Congo, Egypt, Gabon, The Gambia, Guinea, Haiti, Jordan, Kenya, Malaysia, Mozambique, Philippines, Senegal, and Vietnam). International institutions such as the International Monetary Fund, the World Bank, the African Development Bank, the Asian Development Bank, the European Central Bank, the European Commission, the European Stability Mechanism, the OECD and the UNCTAD also participated in this Conference. Civil society also participated in the Conference, with the attendance of the press and of Non-Governmental Organizations (NGOs) such as ONE, Erlassjahr (Jubilee Germany), Jubilee Debt Campaign UK, Eurodad, CCFD-Terre solidaire, Plateforme Dette et développement and CATM France (Comité pour l’abolition des dettes illégitimes).

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Paris Forum

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Chaiman's Summary

Event date:

Thursday, 21 June, 2018 - 11:30

The Paris Club releases comprehensive data on its claims as of 31 December 2017

Since 2008, the Paris Club has published on an annual basis the amount of its claims on foreign countries.

These claims are held either by the Paris Club member states directly, or through their appropriate institutions (especially export credit or official development aid agencies) on behalf of the member states.

The table published on the Paris Club website shows the total amount of claims as of 31 December 2017 held by Paris Club members on each debtor country, with a split between Official Development Assistance (ODA) claims and non-Official Development Assistance (NODA) claims. The stock of claims is aggregated at each debtor country level.

The total of Paris Club claims, excluding late interest, amounts to USD 313 billion of which USD 163 billion represents ODA claims and USD 150 billion represents NODA claims.

Some amounts on which Paris Club creditors decided to provide debt relief may still appear in this table for technical reasons, especially delays in the signing of bilateral agreements implementing Paris Club agreements.

The table contains comprehensive data that cover the full range of claims held on sovereign countries and public entities by Paris Club members, who took part in this global data call. It therefore encompasses very different categories of debtors, roughly half of which have always fully serviced their debt owed to Paris Club full and ad hoc members. Ninety of the debtor countries listed in the table have negotiated an agreement with the Paris Club at some time in the past. Most of the countries listed below are very unlikely to apply for debt relief in the future given their current macroeconomic prospects.

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2017a.pdf

Event date:

Thursday, 21 June, 2018 - 19:00

As of 31 December 2017

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2017a.pdf

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Thursday, 21 June, 2018 - 19:00

Publication of the 2017 annual report of the Paris Club

The 2017 annual report of the Paris Club is now available on the Paris Club website.

2017 has been a very intense year for the Paris Club, which has demonstrated the crucial role it has to play on sovereign debt issues as an indispensable forum for coordination and information sharing.

In 2017, the Paris Club contributed to the development of sustainable financing practices. An important step has been taken in strengthening the international financial architecture with the adoption by the G20 member countries of operational principles of sustainable financing in March 2017. This issue has irrigated all the works and events organized by the Paris Club during the year, whether in the discussions the Paris Club had with the borrowing countries or in the dialogue it conducted with the official and private creditors.

In addition, the Paris Forum pursued its Outreach initiatives with the organization, in addition to its annual conference which brought together representatives of over forty lenders and borrowers, a regional conference in southern Africa on the issue of sustainable financing. This new format, which has proved its relevance to allow frank and regular exchanges between lenders and borrowers, will be continued in 2018.

Background notes

1. The Paris Club was formed in 1956. It is an informal group of creditor governments. It meets in Paris to coordinate policies, share information, and in some cases to meet with debtor countries to agree on restructuring their debts.

2. The 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.

3. The publication of an annual report, since 2008, is an example of Paris Club creditors’ commitment to enhance the transparency of the Club’s work and functioning.

4. The 2017 Paris Club annual report comprises four main chapters:

-- A chapter on sustainable financing and the prevention of excessive debt levels in low-income countries,

-- A chapter on transparency and information sharing,

-- A chapter on the Paris Club's engagement with the private sector in promoting sustainable financing,

-- A chapter on the first regional conference in Namibia: a new format to promote good practice.

In addition to these four main chapters, the annual report includes detailed annexes on the current claims, function, principles of the Paris Club and the outstanding capital due by debtor countries.

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pr20180621_annual_report_2017.pdf

ra-club-de-paris-2017_web2.pdf

Event date:

Thursday, 21 June, 2018 - 15:00

Meeting of the Paris Club with representatives of the private sector

OFFICIAL AND PRIVATE CREDITORS COMMIT TO PROMOTING GREATER DEBT TRANSPARENCY AND DEBT SUSTAINABILITY IN LIGHT OF RISING DEBT VULNERABILITIES IN DEVELOPING COUNTRIES

Delegates representing official and private creditors met in Paris on June 20 for the 18th Annual Meeting of the Institute of International Finance and the Paris Club to discuss debt vulnerabilities in developing countries, including specific country cases. Non Paris Club official creditors, including the representatives from the G20 Presidency, the IMF and the World Bank, also took part. This annual meeting is a unique event designed to foster dialogue and cooperation between all creditors, and to reflect on both recent developments and longer-term trends in the field of sovereign borrowing.

Creditors evaluated recent trends in the sovereign debt landscape, with a focus on developing countries. A substantial number of developing countries are facing strains related to debt vulnerabilities given the significant increase in debt stocks, while debt instruments are becoming more varied and complex.

Participants reviewed and discussed the financial situation in some developing countries where debt sustainability is at risk. In particular, participants expressed concerns about the situation in several sub-Saharan African countries that are currently in debt distress or at high risk of debt distress within a few years of having benefitted from significant debt relief through the Heavily Indebted Poor Countries initiative.

Participants also discussed the debt situation in certain Latin American and Caribbean countries, including Venezuela and Barbados, which are both in selective default.

Recalling that preserving debt sustainability is a shared responsibility between debtors and creditors, participants acknowledged that all creditor groups have a stake in ensuring that lending to developing countries does not undermine debt sustainability. The official sector reaffirmed their commitment, especially through the Operational Guidelines for Sustainable Financing adopted by the G20. The IIF presented the key features of a proposed set of Debt Transparency Principles which will assist both lenders and borrowers in the assessment of debt sustainability. Further work will be needed to finalize these Principles, with the goal of endorsement by the Group of Trustees of the Principles for Stable Capital Flows and Fair Debt Restructuring in October 2018.

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Attachments:

iif_pr2018.pdf

Event date:

Wednesday, 20 June, 2018 - 18:00

Second regional Paris Forum conference in St Kitts & Nevis

The Paris Forum and Eastern Caribbean Central Bank Partner to host the Second Paris Forum Regional Conference

The Paris Forum and the Eastern Caribbean Central Bank (ECCB) collaborated to host the second regional Paris Forum conference which focused on ways to strengthen financial resilience and improve debt management in Caribbean countries vulnerable to external shocks.

The Conference brought together Financial and Permanent Secretaries and other members of the Ministries of Finance of Caribbean countries, ECCB senior officials, Paris Club members and financial institutions including the Caribbean Development Bank, the International Monetary Fund and the World Bank at the ECCB Headquarters in St Kitts and Nevis on 12 April to share perspectives and experiences on the theme: Financial Resilience and Debt Management.

During the one-day conference, the participants were exposed to presentations and engaged in discussion on the topics: (i) Enhancing Resilience to External Volatility Including Through Financial Innovation; and (ii) Building Domestic Capacities to Manage Public Debt. They reviewed available tools to mitigate the impact of external shocks on public finances for example, fiscal buffers, long term local currency bonds, disaster risk insurance and State contingent debt instruments. The participants also shared views on ways to strengthen public financial management.

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Paris Forum regional conference in St Kitts and Nevis

Attachments:

pr20180412_2nd_paris_forum_regional_conference.pdf

Event date:

Thursday, 12 April, 2018 - 00:00

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