Paris Club
Encyclopedia
Debt restructuring
Debt restructuring is a process that allows a private or public company – or a sovereign entity – facing cash flow problems and financial distress, to reduce and renegotiate its delinquent debts in order to improve or restore liquidity and rehabilitate so that it can continue its...
, debt relief, and debt cancellation to indebted countries and their creditors. Debtors are often recommended by the International Monetary Fund
International Monetary Fund
The International Monetary Fund is an organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world...
after alternative solutions have failed.
It meets every six weeks at the French Ministry of the Economy, Finance, and Industry in Paris. It is chaired by a senior official of the French Treasury
Treasury
A treasury is either*A government department related to finance and taxation.*A place where currency or precious items is/are kept....
, currently the Director General of the Treasury [Ramon Fernandez]. The club grew out of crisis talks held in Paris in 1956 between the nation of Argentina
Argentina
Argentina , officially the Argentine Republic , is the second largest country in South America by land area, after Brazil. It is constituted as a federation of 23 provinces and an autonomous city, Buenos Aires...
and its various creditors. Its principles and procedures were codified at the end of the 1970s in the context of the North-South Dialogue.
1990s
In the 1990s, the club began to treat the HIPCHeavily Indebted Poor Countries
Heavily Indebted Poor Countries is a group of 40 developing countries with high levels of poverty and debt overhang which are eligible for special assistance from the International Monetary Fund and the World Bank.- History and structure :...
(Heavily-Indebted Poor Countries) and non-HIPCs differently. The club began to grant increasingly larger debt reductions for the HIPCs. For the non-HIPCs, the club engaged less in debt reductions and moved towards encouraging the absorption of non-HIPCs' financial losses by bondholders and other private creditors.
2000s
In 2004, the Club decided to write-off the debts of IraqIraq
Iraq ; officially the Republic of Iraq is a country in Western Asia spanning most of the northwestern end of the Zagros mountain range, the eastern part of the Syrian Desert and the northern part of the Arabian Desert....
, as the rebuilding of Iraq is incomparable. After the 2004 Indian Ocean earthquake
2004 Indian Ocean earthquake
The 2004 Indian Ocean earthquake was an undersea megathrust earthquake that occurred at 00:58:53 UTC on Sunday, December 26, 2004, with an epicentre off the west coast of Sumatra, Indonesia. The quake itself is known by the scientific community as the Sumatra-Andaman earthquake...
, the Paris Club decided to suspend temporarily some of the repayment obligations of the affected countries.
In November 2005, during the tenure of Dr. Ngozi Okonjo-Iweala as Nigeria's Minister of Finance,
the Nigerian government "won Paris Club approval for a debt-relief deal that eliminated $18 billion of debt in exchange for $12 billion in payments ...". This discharged "...$30 billion of Nigeria's total $37 billion external debt."
In April 2006, Nigeria
Nigeria
Nigeria , officially the Federal Republic of Nigeria, is a federal constitutional republic comprising 36 states and its Federal Capital Territory, Abuja. The country is located in West Africa and shares land borders with the Republic of Benin in the west, Chad and Cameroon in the east, and Niger in...
became the first African country to fully pay off its debt (estimated $30 billion) owed to the Paris Club.
On September 2, 2008, President Cristina Fernández de Kirchner
Cristina Fernández de Kirchner
Cristina Elisabet Fernández de Kirchner , commonly known as Cristina Fernández or Cristina Kirchner is the 55th and current President of Argentina and the widow of former President Néstor Kirchner. She is Argentina's first elected female president, and the second female president ever to serve...
of Argentina
Argentina
Argentina , officially the Argentine Republic , is the second largest country in South America by land area, after Brazil. It is constituted as a federation of 23 provinces and an autonomous city, Buenos Aires...
announced plans to pay off the entirety of debt owed to the Paris Club, which amounted to roughly $6.7 billion. Political pressures ensued and though the government officially insists its intention to repay, government officials have stated that this is unlikely until global credit conditions improve.
On September 16, 2010, the Paris Club canceled 1.26 billion dollars of Liberia
Liberia
Liberia , officially the Republic of Liberia, is a country in West Africa. It is bordered by Sierra Leone on the west, Guinea on the north and Côte d'Ivoire on the east. Liberia's coastline is composed of mostly mangrove forests while the more sparsely populated inland consists of forests that open...
's debt, 100% of the Paris Club's share of a World Bank-IMF poverty reduction program.
On November 18, 2010, the Paris Club canceled $7.35Bn of Democratic Republic of the Congo
Democratic Republic of the Congo
The Democratic Republic of the Congo is a state located in Central Africa. It is the second largest country in Africa by area and the eleventh largest in the world...
's debt. This resulted in the removal of over 50% of their debt.
Observers
- International Monetary FundInternational Monetary FundThe International Monetary Fund is an organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world...
(IMF) - World BankWorld BankThe World Bank is an international financial institution that provides loans to developing countries for capital programmes.The World Bank's official goal is the reduction of poverty...
- Organisation for Economic Co-operation and DevelopmentOrganisation for Economic Co-operation and DevelopmentThe Organisation for Economic Co-operation and Development is an international economic organisation of 34 countries founded in 1961 to stimulate economic progress and world trade...
(OECD) - United Nations Conference on Trade and DevelopmentUnited Nations Conference on Trade and DevelopmentThe United Nations Conference on Trade and Development was established in 1964 as a permanent intergovernmental body. It is the principal organ of the United Nations General Assembly dealing with trade, investment, and development issues....
(UNCTAD) - European CommissionEuropean CommissionThe European Commission is the executive body of the European Union. The body is responsible for proposing legislation, implementing decisions, upholding the Union's treaties and the general day-to-day running of the Union....
- African Development BankAfrican Development BankThe African Development Bank Group is a development bank established in 1964 with the intention of promoting economic and social development in Africa...
- Asian Development BankAsian Development BankThe Asian Development Bank is a regional development bank established on 22 August 1966 to facilitate economic development of countries in Asia...
- European Bank for Reconstruction and DevelopmentEuropean Bank for Reconstruction and DevelopmentFounded in 1991, the European Bank for Reconstruction and Development uses the tools of investment to help build market economies and democracies in 30 countries from central Europe to central Asia. Its mission was to support the formerly communist countries in the process of establishing their...
(EBRD) - Inter-American Development BankInter-American Development BankThe Inter-American Development Bank is the largest source of development financing for Latin America and the Caribbean...
(IADB)
Former Chairpersons
Incomplete list:- Jean-Pierre JouyetJean-Pierre Jouyet-Biography:Jean-Pierre Jouyet, was born on 13 February 1954 at Montreuil-sous-Bois in the suburbs of Paris, and is a top civil servant who has also held political positions....
- Jean-Claude TrichetJean-Claude TrichetJean-Claude Trichet is a French civil servant who was the president of the European Central Bank, a position he held from 2003 to 2011. He is also a member of the Board of Directors of the Bank for International Settlements...
The complete list of Paris Club Chairmen, and much other useful information about the Paris Club's history and operations, can be found in "Sovereign Debt Restructuring: the Case for Ad Hoc Machinery", by Lex Rieffel (Brookings Institution Press, 2003).