The 2016 annual report of the Paris Club is now available on the Paris Club website.

2016 has been a historical year for the Paris Club, in terms of its recognition on the world stage, its expansion to two new members and its contribution to sovereign debt issues.

Paris Club’s 60^th anniversary was celebrated on July 1^st, on which day Korea was welcomed as its 21^st member, marking the culmination of almost 20 years of cooperation. This exceptional day gathered high-level officials to discuss the current and future challenges of sustainable financing and orderly sovereign debt restructuring.

Soon after Korea, Brazil became the 22^nd member of the Paris Club, on November 29^th, during the 4^th Annual Paris Forum Conference. These two accessions demonstrate the Paris Club’s ability to expand its membership to emerging creditors and reinforce its position as the principal international forum for restructuring official bilateral debt.

This Conference also enabled representatives of more than forty sovereign credit and debtor countries and of ten international organizations to exchange views on the definition of such operational guidelines for sustainable financing, during a session open to the press and civil society.

In 2016, the Paris Club and the Institute of International Finance (IIF), worked hand in hand to continue their joint reflection by organizing their 16^th annual meeting. This meeting was a unique opportunity for public and private creditors to share views on the macroeconomic environment, the impact of capital flows on emerging markets and to debate and engage on the management of sovereign debt issues.

Finally, 2016 will be remembered as a historical year thanks to the G20 leaders’ communiqué delivered in Hangzhou, which explicitly referred for the very first time to the Paris Club as “the principal international forum for restructuring official bilateral debt”. This statement is all the more symbolic that it was made under the auspices of the G20 Chinese Presidency, China having been also ad hoc participant of the Paris Club for the last few years.

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 2016 Paris Club annual report comprises five main chapters:

--  A chapter on the accession of two new members to the Paris Club,

--  A chapter on the celebration of Paris Club’s 60^th Anniversary,

-- A chapter on the strengthening of the Paris Forum and global co-operation on sovereign debt issues,

-- A chapter on the enhancing the co-operation with the private sector,

--  A chapter on the Paris Club’s contribution on the review of OECD guidelines on sustainable lending.

In addition to these five 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.

Following Korea on July 1^st, Brazil is the second important creditor to join the Paris Club this year. Brazil’s admission is a key step forward in the Paris Club’s enlargement to emerging creditors, which strengthens the Paris Club’s position as the principal international forum for restructuring official bilateral debt as it was recognized in the G20 leaders’ communiqué in Hangzhou.

Brazil’s Finance Minister, Henrique Meirelles, formalized Brazil’s accession to the Paris Club as the 22^nd member.

Brazil has been playing a growing role as a sovereign creditor over recent years and has a long history of cooperation with the Paris Club. Since 1985, Brazil has participated to 65 Paris Club negotiations as a creditor; these treatments have benefited 19 debtor countries.

As a Paris Club member, Brazil will be better able to influence the international financial agenda and have a greater say in future negotiations of sovereign debt restructurings. Brazil will abide by the Paris Club’s Principles –solidarity, consensus, information sharing, conditionality, case-by-case approach and comparability of treatment– which were designed as a framework for fostering an open and constructive dialogue among sovereign creditors.

Background notes

1. The Paris Club was formed in 1956. It is an informal group of creditor governments from major creditor countries and the principal international forum for restructuring official bilateral debt.

2. The members of the Paris Club are representatives of the governments of Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Italy, Ireland, Israel, Japan, Korea, the Netherlands, Norway, the Russian Federation, Spain, Sweden, Switzerland, the United Kingdom and the United States of America.

On 1 July 2016, the Paris Club hosted an international conference at the French Ministry of Finance to celebrate its 60th anniversary and welcome Korea as its 21st member.

The Paris Club gathered high-level officials for an international conference in Paris to take stock of 60 years of sovereign debt restructurings and to discuss the current and forward-looking challenges of sustainable financing, orderly sovereign debt restructuring and more generally the international financial architecture of official debt.

At the end of this conference, the Paris Club proudly welcomed Korea as its 21st member. After almost 20 years of cooperation with the Paris Club, Korea has decided to become a full member. Korea’s membership will reinforce the Paris Club as the principal international forum for restructuring official bilateral debt, which allows more efficient, timely and orderly resolution of sovereign debt crises. It also demonstrates the Paris Club’s ability to expand its membership to emerging creditors on the basis of shared principles and to foster an open and constructive dialogue among sovereign creditors.

Paris Club current and past teams met on 1 July 2016 on the occasion of 60 years of the Paris Club

Paris Club delegates

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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 contains comprehensive data that cover the full range of claims held on sovereign countries and public entities by Paris Club members, including its 21st and newest member the Republic of Korea, and one ad hoc participant, Brazil, 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.

The table published on the Paris Club website shows the total amount of claims as of
31 December 2015 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 310.95 billion of which USD 149.95 billion represents ODA claims and USD 161 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.

“Debt sustainability in developing economies: new policies and new tools to address an old issue” - Washington DC

The objective of the “Paris Forum” events is to foster frank and open discussions between creditor and debtor countries, on topics pertaining to official financing and to sovereign debt, including sovereign debt crisis prevention and resolution. It is primarily a forum of collective interest to promote exchange of information and best practices on these issues, while also covering Paris Club activity, methods and objectives.

Introductory remarks

New policies to promote sustainable financing practices

While many among the poorest countries have seen their debt burden reduced over the last decades, especially through the HIPC initiative, many remain vulnerable to debt crises, which includes several “post-HIPC” countries which are almost reaching pre-HIPC debt levels. Against this background, taking into account the IMF and World Bank’s framework for debt sustainability analysis, as well as their respective debt limit policies, is critical to promote sustainable financing practices, in line with the recommendations of the Addis Ababa Action Agenda. This session will address the new debt challenges faced by LICs, and discuss how the recent and upcoming reforms of these policies aim at helping countries to better manage risks.

Lead speaker:  Min ZHU, IMF Deputy Managing Director

Innovation in Sovereign Debt Restructurings

Debt restructuring processes must develop new methods to adapt to a changing and uncertain financial environment. As demonstrated in the IMF 2013 paper “Too Little, Too Late”, the cost of debt restructurings is often increased by the fact that discussions on debt usually start when debt sustainability is already compromised. Introducing contingency instruments in debt contracts can be a way to achieve greater resilience to adverse economic or environmental events. Another promising avenue is to convert the benefits of a debt restructuring or buyback into an investment in the country’s economic fabric, as in the case of Seychelles’ environmental buyback.

Lead speaker: Jean Paul ADAM, Seychelles Minister of Finance, Trade and the Blue Economy

Concluding remarks