PARIS CLUB - INTERNATIONAL RELATIONS
News: Paris
Club likely to provide financial assurances to IMF on Sri Lanka debt: What is
this grouping?
What's in the news?
● Reuters
has reported that the Paris Club, an informal group of creditor nations, will
provide financial assurances to the International Monetary Fund on Sri Lanka’s debt.
Key takeaways:
● An
assurance from the Paris Club, as well as other bilateral creditors, is one of
the conditions that Sri Lanka has to fulfil for the IMF to begin disbursing a
$2.9 bn bailout package to the beleaguered nation that all but collapsed last
year under a severe economic crisis.
Paris Club:
● The
Paris Club is a group of mostly western
creditor countries that grew from a 1956 meeting in which Argentina agreed
to meet its public creditors in Paris.
● It
is a forum where official creditors meet to solve payment difficulties faced by
debtor countries.
Objective:
● To
find sustainable debt-relief solutions
for countries that are unable to repay their bilateral loans.
Members:
● Australia,
Austria, Belgium, Brazil, Canada, Denmark, Finland, France, Germany, Ireland,
Israel, Italy, Japan, Korea, Netherlands, Norway, Russian Federation, Spain,
Sweden, Switzerland, United Kingdom, United States of America.
How has Paris Club been involved in debt agreements?
● Since
its beginnings, the Paris Club has reached 478 agreements with 102 different
debtor countries.
● Since
1956, the debt treated in the framework of Paris Club agreements amounts to $
614 billion.
● It operates on the
principles of consensus and solidarity.
Any agreement reached with the debtor country will apply equally to all its
Paris Club creditors.
Role of the Paris Club over time:
● The
Paris group countries dominated bilateral lending in the last century, but
their importance has receded over the last two decades or so with the emergence
of China as the world’s biggest bilateral lender.
● In
Sri Lanka’s case, for instance, China, Japan and India are the largest
bilateral creditors. Sri Lanka’s debt to China is 52 percent of its bilateral
debt, 19.5 percent to Japan, and 12 percent to India. With Japan a member of
the Paris Club, Sri Lanka needed assurances from China and India as well.