Glossary
Active agreement
A Paris Club rescheduling agreement is considered "active" until the date of the last repayment maturity due under the agreement in accordance with the repayment schedules provided for in the agreement. After this date, maturities due under the agreement are in theory repaid.
Participating creditor countries and the debtor country sign Agreed Minutes at the end of a negotiation session. This document states the commonly agreed debt treatment in writing. This is not a legally binding document but a recommendation by the heads of delegations of Participating creditor countries and of the debtor country to their governments to sign a bilateral agreement implementing the debt treatment.
Interest rate defined in bilateral agreements implementing the Paris Club Agreed Minutes, based upon standard interest rates of the currency considered, plus a management fee. This rate may be fixed or variable and does not include a country-risk premium.
Debt due and not paid as of a given date. Arrears may be late payments as well as debt due a long time before.
Commercial credits and non-ODA credits
(i) Credits granted by a bank or a supplier to a debtor country for importing goods and services. When these credits are guaranteed by an appropriate institution of a Paris Club creditor, they are included in the claims treated in the context of the Paris Club. (ii) Non-ODA credits are sometimes referred to as commercial credits.
Completion point
In the context of the Heavily Indebted Poor Countries Initiative (HIPC initiative), the international financial community commits to provide sufficient assistance for the country to achieve debt sustainability at a set date called "completion point". The timing of completion point, a decision of the Executive Boards of the IMF and World Bank, depends on the satisfactory implementation of key structural reforms agreed to at the decision point, the maintenance of macroeconomic stability, and the adoption and implementation of a Poverty Reduction Strategy Paper for at least one year.
Concessional Treatment, Concessionality
Concessionality can occur either through a cancellation of part of the claims, or through a rescheduling of the claims over a long period of time with an interest rate that is lower than the appropriate market rate. When a debt treatment results in a reduction of the net present value of the claims rescheduled, it includes concessionality.
Consolidation
Change of the terms of debt payment obligations. This can be implemented either through a change of the terms of the existing debt ("rescheduling"), or through the exchange of the debt for a new instrument (notably, through "refinancing").
CRD (Capital remaining due)
Sum of futures maturities of principal.
Cut-off date
When a debtor country first meets with Paris Club creditors, a "cut-off date" is defined. Credits granted after this cut-off date generally are not subject to future rescheduling. The cut-off date is designed to protect credits granted by Paris Club creditors after a rescheduling. The cut-off date therefore helps restore access to credit for debtor countries facing a liquidity crisis.
De minimis provision
Paris Club agreements define a "de minimis" amount. When the amount of the claims of a Paris Club creditor potentially covered by the debt treatment agreement is lower than this amount, this creditor participates in the meeting as an observer and does not have to apply the debt treatment to its claims. This rule aims at avoiding debt treatments that do not have a significant impact in terms of debt relief and would be costly to implement.
Debt reduction, DR
In the context of a concessional treatment, creditors may usually choose among a number of options to provide the required debt reduction in net present value. When the creditor chooses the "DR" option, the net present value reduction is achieved through a cancellation of part of the claims.
Debt service reduction, DSR
In the context of a concessional treatment, creditors may usually choose among a number of options to provide the required debt reduction in net present value. When the creditor chooses the "DSR" option, the net present value reduction is achieved through a rescheduling of the claims at an interest rate lower than the appropriate market rate.
Paris Club agreements may contain a provision enabling creditors to voluntarily engage in debt swaps. These operations may take the form of debt-for-nature, debt-for-aid, debt-for-equity or other local currency debt swaps. To ensure full transparency between creditors, debtors and creditors submit a report to the Paris Club Secretariat on the transactions conducted.
Debts cancelled
The reduction in net present value of the debt rescheduled by Paris Club creditors is considered as a cancellation.
Debts due
Medium and long term debt due to Paris Club creditors before the specific Paris Club agreement.
Debts rescheduled
Debts treated, less debt cancelled.
Debts treated
Debts consolidated pursuant to the specific Paris Club agreement.
Decision point
In the context of the Heavily Indebted Poor Countries (HIPC) initiative, at the decision point, the Executive Boards of the IMF and World Bank formally decide on a country's eligibility, and the international community commits to provide sufficient assistance by the completion point for the country to achieve debt sustainability calculated at the decision point.
Deferral
A debt treatment may defer the payment of debt due immediately or in the near future to a later date. When a new long-term payment profile is defined, the treatment applied is not a deferral, but a reprofiling or a rescheduling.
Eligible debt
Debt that may be treated in the context of a Paris Club agreement.
Exit treatment
An exit treatment is the last debt treatment a country normally gets from the Paris Club. The aim is that the debtor country will not need any further debt treatment and will thus not come back for negotiation to the Paris Club.
Flow treatment
Flow treatments aim to close the debtor country's financing gap identified by the IMF in the framework of its programs. The period of time to which Paris Club agreements refer is usually the one covered by the IMF program that shows a financing gap that can only be covered by debt rescheduling. This period is called the "consolidation period". Only maturities due to Paris Club creditors falling due during this period are treated. However, in some cases, arrears accumulated as of the start of the "consolidation period" are also treated.
Late interest
Interest that accrues on arrears. The late interest rate usually includes the original interest rate of the credits, plus a penalty.
Moratorium interest, interest on the consolidation
Interest rate applied on the rescheduling. The interest rate and the conditions applying to the claims of Paris Club creditor countries are defined in bilateral agreements.
Net Present Value
The net present value (NPV) of debt is defined as the sum of all future debt-service obligations (interest and principal) on existing debt, discounted at the appropriate market rate. Whenever the interest rate on a loan is lower than the market rate, the resulting NPV of debt is lower than its face value
NPRD (Non previously rescheduled debt)
Credits and loans with a maturity of more than one year, that have been granted before the cut-off date and that have not been rescheduled pursuant to a previous Paris Club agreement.
Observers
Representatives of international financial institutions or of members of the Paris Club that have no claims concerned by the debt treatment (de minimis creditors, creditors with only short term or post-cut-off date claims, that are not treated) that attend a negotiation session. They do not sign the Agreed Minutes but are referred to in it.
ODA credits
"Official development assistance" ("ODA") credits are defined by the OECD as credits with a low interest rate and aimed at development.
Official creditor
This term refers to
a) official bilateral creditors (governments or their appropriate institutions), including Paris Club members
b) multilateral creditors (international institutions such as the IMF, the World Bank or regional development banks).
Participating Creditor Countries
The creditor countries that sign the Agreed Minutes. They are permanent members of the Paris Club or other official creditors.
Post-cut-off-date debt
Credits and loans with a maturity of more than one year, that have been concluded after the cut-off date.
PRD (Previously rescheduled debt)
Credits and loans with a maturity of more than one year,that have been concluded before the cut-off date and that have been rescheduled pursuant to a previous Paris Club agreement.
Pre-cut-off-date debt
Credits and loans with a maturity of more than one year and that have been concluded before the cut-off date. [More details / Rules and Principles / Rules and conventions].
Refinancing
Creditor countries may choose to apply the terms of a Paris Club agreement either through a refinancing (they make a new loan that is used to repay the existing debt) or through a change of the terms and conditions of the existing debt (rescheduling).
Reprofiling
In a Paris Club agreement, part of the debt may be reprofiled over a few years, instead of a long-term period of time. The duration of a reprofiling is an intermediate between a deferral and a long-term rescheduling.
Rescheduling
(i) Consolidation, change of the terms of debt payment obligations
(ii) when opposed to concessional treatment, non-concessional consolidation
(iii) when opposed to deferral or reprofiling, the part of a consolidation with the longer terms of repayment (iv) when opposed to refinancing, consolidation through a change of the terms and conditions of the existing debt.
Stock
Sum of Capital Remaining Due (future maturities of principal) and of arrears in principal and interest.
Stock treatment
Some Paris Club treatments apply not only to the payments due over a given period of time, but to the entire stock of debt. The aim of agreements covering the stock of debt is to provide a country with a final Paris Club treatment called exit treatment.
Terms of reference
When there are only a few creditors concerned in a debt treatment, the Paris Club agreement is not an Agreed Minute, but "terms of reference". The terms of the treatment are defined through an exchange of letters between the President of the Paris Club and the government of the debtor country.
In a subsequent debt reduction, granting more debt reduction on debt previously reduced under a Paris Club agreement to provide even further debt relief (e.g., when increasing the cancellation level from 33.33% of Toronto terms to 67% of Naples terms).