Roles and missions

The Paris Club is an informal group of official creditors whose role is to find coordinated and sustainable solutions to the payment difficulties experienced by debtor countries. As debtor countries undertake reforms to stabilize and restore their macroeconomic and financial situation, Paris Club creditors provide an appropriate debt treatment. Paris Club creditors provide debt treatments to debtor countries in the form of rescheduling, which is debt relief by postponement or, in the case of concessional rescheduling, reduction in debt service obligations during a defined period (flow treatment) or as of a set date (stock treatment).

The origin of the Paris Club dates back to 1956 when Argentina agreed to meet its public creditors in Paris. Since then, the Paris Club has reached 484 agreements with 102 different debtor countries. Since 1956, the debt treated in the framework of Paris Club agreements amounts to $616 billion.

However, even if it has no legal basis or status, its work is based on a number of rules and principles agreed by creditor countries, which facilitates the decision making process and the conclusion of agreements.

The six principles underlying Paris Club activities:

Solidarity

All members of the Paris Club agree to act as a group of their dealings with a given debtor country and be sensitive to the effect that the management of their particular claims may have on the claims of other members.

Consensus

Paris Club decisions cannot be taken without a consensus among the participating creditor countries.

Information sharing

The Paris Club is a unique information-sharing forum. Paris Club members regularly share views and information with each other on the situation of debtor countries, benefit from participation by the IMF and World Bank, and share data on their claims on a reciprocal basis. In order for discussions to remain productive, deliberations are kept confidential.

Case-by-case

The Paris Club makes decisions on a case-by-case basis in order to tailor its action to each debtor country's individual situation. This principle was consolidated by the Evian Approach.

Principle 5 - Conditionality

The Paris Club only negotiates debt restructurings with debt countries that:

• need debt relief. Debtor countries are expected to provide a precise description of their economic and financial situation,
• have implemented and are committed to implementing reforms to restore their economic and financial situation, and
• have a demonstrated track record of implementing reforms under an IMF program.

This means in practice that the country must have a current program supported by an appropriate arrangement with the IMF (Stand-by, Extended Fund Facility, Poverty Reduction and Growth Facility, Policy Support Instrument). The level of the debt treatment is based on the financing gap identified in the IMF program.

In the case of a flow treatment, the consolidated period coincides with the period when the IMF arrangement shows a need for debt relief. When the flow treatment extends over a long period of time (generally more than one year), the Paris Club agreement is divided into phases. The amounts falling due during the first phases are implemented following completion of conditions mentioned in the Agreed Minutes, including non-accumulation of arrears and approval of the reviews of the IMF program.

Comparability of treatment

A debtor country that signs an agreement with its Paris Club creditors should not accept from any of its non-Paris Club commercial and bilateral creditors terms of treatment of its debt less favorable to the debtor than those agreed with the Paris Club.