The International Monetary Fund, World Bank, and India will organise a meeting with creditors, both traditional ‘Paris Club’ creditors, such as France and the United States, and new creditors, such as China, in a bid to offer solutions to those nations tackling unsustainable debt levels.
The borrowing nations that will be part of the meet include Ghana, Ethiopia and Zambia, reported news agency Bloomberg citing sources. Envoys from Sri Lanka, Ecuador, and Suriname will also be present, according to the source.
The Paris Club, an informal group of creditor nations, is looking to provide financial assurances to the International Monetary Fund on Sri Lanka’s debt, Reuters had earlier reported.
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One of the conditions that Sri Lanka has to fulfill for the IMF to grant a $2.9 bn bailout package owing to the economic crisis last year, includes assurance from the Paris Club and other bilateral creditors.
Creditors including France, the US, UK and Japan will participate, as well as the Institute of International Finance, the global association for the financial industry, and private sector creditors, as per the Bloomberg report.
The meeting comes ahead of the gathering of Group of 20 finance ministers and central bankers next week in Bangalore.
What’s the agenda of the meeting?
The meeting will take place virtually on Friday, and is aimed to address the current shortcomings in debt restructuring, the report quoted an IMF spokesperson as saying.
The gathering will also focus on ensuring comparability of treatment between official and private creditors, and dealing with resolving technical and legal issues, as per the report.
What’s Paris Club?
It is a group mostly comprising western creditor countries formed in a 1956 meeting in which Argentina agreed to meet its public creditors in Paris. The club seeks to provide sustainable debt-relief solutions for nations that are facing debt crisis.
The group operates on the principles of consensus and solidarity. It means any agreement reached with the debtor country will apply equally to all its Paris Club creditors.
The club describes itself as a forum where official creditors meet to solve payment difficulties faced by debtor countries. All 22 are members of the group called Organisation for Economic Co-operation and Development (OECD).
The members include 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.
Paris Club has so far reached 478 agreements with 102 different debtor countries, as per the information on its website. 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.
G20 official creditors China and India, who overtook the Paris Club as lenders in the last decade, agreed to coordinate to provide debt relief consistent with the debtor’s capacity to pay and maintain essential spending needs.