The Paris Club holds internal negotiations on principles for handling debt and also negotiates with individual countries on payment postponements or debt reduction.
The Paris Club is chaired by the French treasury and its secretariat consists of treasury employees who work for the Paris Club on a part time basis. Since 1956, 386 agreements have been entered into with 80 countries.
The work of the Paris Club is based on five main principles:
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The “Case by Case” principle. The decisions of the Paris Club are based on a factual assessment of the indebted country’s specific needs.
- Consensus. All participating countries must be in agreement before a decision is reached.
- Equal treatment of other creditors.
- Creditor solidarity. No creditor may seek to achieve terms which are better than those which follow from a Paris Club agreement.
- Conditionality. The indebted country must have an IMF programme before negotiations begin. The aim of the programme is to implement reforms to improve the economic situation in the country.
The Norwegian delegation is led by the Ministry of Foreign Affairs and GIEK participates and assists with technical expertise. The Paris Club meets ten times a year to review the debt situations of selected countries. Negotiations with specific countries are normally held after the country review.
The Paris Club renegotiates country to country liabilities, which mainly arise from defaulted, government-guaranteed export credits from GIEK. Negotiations are carried out with countries which have payment obligations which exceed the payment capacity of their national economies, with consequent payment problems. The Paris Club helps to fill the finance gap in the debtor countries’ loan programmes with the IMF. The poorest countries have debts cancelled, whilst middle income countries usually have payment dates postponed.
Many of the countries involved in these negotiations are among the world’s poorest and are treated under the so called HIPC Initiative (Heavily Indebted Poor Countries Initiative). These countries are entitled to up to 100% cancellation of debt. Debt cancellation is done partly at decision point, when the country has been given the status of a HIPC country, and partly at completion point, after the country has completed agreed measures – such as adopting a plan for poverty reduction – in collaboration with the IMF.
The Paris Club is actively used to regain as much as possible of outstanding liabilities. GIEK requires compensation before cancelling debts.
The Paris Club’s website: http://www.clubdeparis.org/
