Paris Club

Posted in Finance, Accounting and Economics Terms, Total Reads: 328
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Definition: Paris Club

The Paris Club is an informal group of creditors nations whose aim is to find harmonized and sustainable solutions to the payment complications experienced by debtor countries. As debtor nations undertake reforms to alleviate and restore their macroeconomic and financial condition, Paris Club creditors provide an appropriate debt solution. Paris Club creditors offer debt treatments to debtor countries in terms of rescheduling, which is debt relief by deferral or, in the case of concessional rescheduling, which is discount in debt service obligations for a defined period (flow treatment) or for a set date (stock treatment)


The Paris Club members meet on ten months a year in the French capital, barring the months of February and August. These monthly meetings sometimes include negotiations with one or more debtor nations that have complied with the Club's pre-conditions for debt negotiation. The foremost conditions a debtor country has to meet are that it should have a proven need for debt relief and should be committed to implementation of economic reform, which in effect implies that it must already have a current program with the International Monetary Fund (IMF) supported by a conditional prearrangement.


The Paris Club key functioning principles are:

Case by case - Case-by-case treatment of debtor nations will continue irrespective of the type of participation or membership.

Consensus – Ad-Hoc or Prospective members are not able to block decision but can shape them, while full member can block the decision as well

Conditionality – Conditionality applies irrespective of the type of participation or membership.

Solidarity - Full assurance of solidarity among Club members.


Comparability of treatment - A debtor nation that has an agreement with its Paris Club creditors should not agree to its other bilateral or/and commercial creditors terms of treatment of its debt less favourable to the debtor than those accepted with the Paris Club.

Presently there are 20 members and till date, Paris Club has signed 430 agreements with 90 debtor nation amounting to $580 billion

 

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