GLOBAL DEBTS: PARIS CLUB AND LONDON CLUBApril 10, 2011 at 3:24 pm | Posted in Development, Economics, Financial, Globalization, Research, Third World | Leave a comment
The Paris Club (French: Club de Paris) is an informal group of financial officials from 19 of some of the world’s biggest economies, which provides financial services such as debt restructuring, debt relief, and debt cancellation to indebted countries and their creditors.
Debtors are often recommended by the International Monetary Fund 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, currently the Director General of the Treasury and Economic Policy Department Xavier Musca.
The club grew out of crisis talks held in Paris in 1956 between the nation of Argentina and its various creditors. Its principles and procedures were codified at the end of the 1970s in the context of the North-South Dialogue.
In the 1990s, the club began to treat the HIPC (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.
In 2004, the Club decided to write-off the debts of Iraq, as the rebuilding of Iraq is incomparable. After the 2004 Indian Ocean earthquake, the Paris Club decided to suspend temporarily some of the repayment obligations of the affected countries.
In April 2006, Nigeria 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 Fernandez de Kirchner of Argentina 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 November 18, 2010, the Paris Club canceled $7.35Bn of Democratic Republic of the Congo‘s debt. This resulted in the removal of over 50% of their debt.
“Argentina still planning to repay Paris Club debt”. MercoPress. 2009-11-11. http://en.mercopress.com/2008/11/11/argentina-still-planning-to-repay-paris-club-debt. Retrieved 2009-05-26.
1. Drew Benson (2009-02-13). “Argentina Unlikely to Pay Back Paris Club During Global Slump”. Bloomberg. http://www.bloomberg.com/apps/news?pid=20601013&sid=aUseMoT8biJs#. Retrieved 2009-05-26.
2. “Paris Club agrees to cancel Liberian debt”. AFP. 2010-09-16. http://www.google.com/hostednews/afp/article/ALeqM5gkmCpwasjrVFw26xLnYqxQpMxb6w. Retrieved 2010-09-28.
An informal group of private creditors on the international stage. Similar to the Paris Club of public lenders. The London Club is not the only informal group of private creditors. Its first meeting took place in 1976 in response to Zaire‘s payment problems.