A similar process used to occur for public debt held by private creditors in the London Club, which was organized in 1970 on the model of the Paris Club as an informal group of commercial banks renegotiating together the debt they hold on sovereign debtors (countries to which they extended loans) which were no longer able to repay.
Creditor countries meet c. ten times a year for Tour d'Horizon and negotiating sessions.
[2] Paris club has reached 478 agreements with 102 debtor countries to date for approximately USD 600 bn rescheduled.
Other official creditors can also participate in negotiation sessions or in monthly "Tours d'Horizon" discussions, subject to the agreement of permanent members and of the debtor country.
When participating in Paris Club discussions, invited creditors act in good faith and abide by the practices described below.
The Secretariat's role is primarily to safeguard the common interests of creditor countries participating in the Club, and to facilitate the reaching of a consensus between them at each level of the discussions.
In the early stages of discussions, the Secretariat analyses the debtor country's payment capacity and provides creditors with a first proposal for a treatment.
Co-Chairman is William Roos, Assistant Secretary for Multilateral Affairs, Trade and Development Policies Department.
In particular, during negotiation sessions, the Chairman of the Paris Club plays the role of intermediary between creditors, who elaborate debt treatment proposals, and the representative of the debtor country, usually the Minister of Finance.
When the flow treatment extends over a long period of time (generally more than one year), the Paris Club agreement is divided into phases.
Subsequent phases are implemented following completion of conditions mentioned in the Agreed Minutes, including non-accumulation of arrears and approval of the reviews of the IMF program.
A debtor country is invited to a negotiation meeting with its Paris Club creditors when it has concluded an appropriate programme with the International Monetary Fund (IMF) that demonstrates that the country is not able to meet its external debt obligations and thus needs a new payment arrangement with its external creditors (conditionality principle).
Paris Club creditors link the debt restructuring to the IMF programme because the economic policy reforms are intended to restore a sound macroeconomic framework that will lower the probability of future financial difficulties.
[9] Other official bilateral creditors may be invited to attend negotiation meetings on an ad-hoc basis, subject to the agreement of permanent members and of the debtor country.
[10] Once an agreement is reached on the terms of the treatment, a document called the Agreed Minutes formalizes the accord in writing in French and in English.
HIPC countries will continue to receive assistance under Cologne terms, which sanction up to 90% debt cancellation.
If the IMF determines that the country suffers from a temporary liquidity problem, its debts are rescheduled until a later date.
Thus, for the poorest and most indebted countries, the level of cancellation of eligible credit is increased to 50% or even 67% (as of September 1999, all treatments carry a 67% debt reduction).
Finally, in September 1996, the joint proposal of the Development Committee of the World Bank and the IMF Interim Committee, the international financial community has recognized that the debt situation of a number of very poor countries, of which three quarters are located in sub-Saharan Africa remained extremely difficult, even after having used traditional mechanisms.
Apart from the HIPC initiative, the Paris Club adopted a new framework for debt restructuring in 2003, the Evian approach.
Through the Evian framework, the Paris Club's goal is to take into account debt sustainability considerations, to adapt its response to the financial situation of debtor countries, and to contribute to current efforts to ensure an orderly, timely and predictable resolution of economic and financial crises.
As international financial markets and capital flows are increasingly integrated, non-Paris Club official bilateral creditors are representing a larger share in the financing of developing and emerging countries.
The objective of the Forum, in this context, is to foster close and regular dialogue between stakeholders, in order to create an international financial environment favorable to sustainable growth in developing countries.
In particular, the Paris Forum aims at enhancing the involvement of emerging countries, be they creditors or debtors, in international debates on sovereign financing, in order to make discussions as open and frank as possible.
It gathered 200+ participants representing 80 countries and institutions [14] and was introduced by Vice-minister Tatiana Rosito from Brazil, Vice-minister Liao Min from China, IMF First Deputy Managing Director Gita Gopinath, Minister of Finance of Qatar Ali bin Ahmed Al Kuwari and Ambassador of Germany in France Stephan Steinlein.
The Paris club has played a major role in debt crisis resolution for a period greater than 65+ years in emerging and developing countries.
In 2006, a significant number of non-governmental organizations have requested a change of rules of the Paris Club, especially for transparency.