The Paris Club, headquartered in the French capital, is an informal group of official creditors established in 1956. It currently has 22 permanent members, drawn from economically advanced countries, and is complemented by ad hoc participants and observers.
The Chair of the Paris Club, traditionally a senior official of the French Treasury, is supported by a Secretariat composed of officials from the same French ministry.
Within the framework of the Paris Club, which meets monthly (the so-called “Tour d’Horizon”), discussions focus on measures for the treatment of sovereign debt, primarily relating to developing countries and emerging economies, vis-à-vis creditor states.
The Club’s work is guided by the principles of solidarity, mandatory consensus in decision-making, information sharing, conditionality, comparability of treatment, and a case-by-case approach.
The debt eligible for treatment is characterized by three main features: (1) public debt (contracted by a state or a public entity, or guaranteed by a state); (2) medium- to long-term maturity (short-term debt—maturing in one year or less—is generally excluded); and (3) debt contracted prior to the so-called “cut-off date” (usually corresponding to the date of the first meeting between the debtor country and creditor countries).
Debt treatment may take the form of restructuring, cancellation, conversion (into programs aimed at poverty reduction, environmental goals, or other purposes), or a combination of these measures.
Debt treatment measures are normally agreed first at the multilateral level through the signing of a Memorandum of Understanding (which is not legally binding) between all creditor countries and the debtor country. These measures are subsequently implemented at the bilateral level through the conclusion of legally binding agreements between the debtor country and each individual creditor country.
Over the years, the Paris Club has applied a variety of approaches to debt treatment, culminating in a specific program for developing countries, the Heavily Indebted Poor Countries (HIPC) Initiative, launched in 1996 by the World Bank (WB) and the International Monetary Fund (IMF) and still in operation today.
To ensure the generalized implementation at national level of this initiative and of others promoted by the international community, Italy adopted Law No. 209 of 2000, entitled “Measures for the reduction of the external debt of the lowest-income and most heavily indebted countries”.
Another major initiative, launched on 15 April 2020 by the G20 Finance Ministers and Central Bank Governors, is the Debt Service Suspension Initiative (DSSI), aimed at granting a suspension of debt service to the poorest countries to help them address the severe liquidity needs caused by the COVID-19 pandemic.
Since its establishment, the Paris Club has concluded 483 debt treatment agreements in favor of 102 countries, for a total amount of approximately USD 616 billion.
On 13 November 2020, the G20 and the Paris Club approved a “Common Framework for Debt Treatments beyond the DSSI” in response to the need of many low-income countries, in the aftermath of the global pandemic, to address heightened medium- to long-term debt sustainability and liquidity challenges.
Unlike the DSSI, which provides only for a moratorium on debt service payments, the Common Framework (CF) also includes the possibility of debt restructuring. In addition, it provides for the participation of creditor countries that are not members of the Paris Club. The first countries to request access to the initiative were Chad, Ethiopia and Zambia, followed by Ghana.