Mr. Thomas Courbe

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Transcript Mr. Thomas Courbe

Paris Club’s role in the financing
of development
Thomas Courbe – Secretary General of the Paris Club
Informal Review Session on Chapter V of the Monterrey Consensus
10-11 March 2008, UN Headquarters
Paris Club’s role in the financing of development
March 2008
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Outline
1- Paris Club’s frameworks of action
2- Paris Club’s achievements since
Monterrey
3- New challenges
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March 2008
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What is the Paris Club ?
 An informal group of 19 creditor countries
 50 years of debt treatment
 All decisions are made by consensus, with a
case by case approach
 Participation of IMF and World Bank to all
meetings
 Two different frameworks to answer liquidity
and debt sustainability problems
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Paris Club’s debt relief for HIPCs
 The Paris Club provides debt treatments :
 When a country is declared eligible to the initiative;
 When a country reaches the Decision point;
 When a country reaches the Completion point.
 At completion point, the Paris Club provides all
necessary debt relief to reach the common reduction
factor determined by the IMF and World Bank.
 All Paris Club creditors go beyond the requirements of
HIPC initiative and provide additional bilateral debt
relief.
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Evian approach
 The Evian approach was launched in 2003 to
answer non-HIPC problems of sustainability
and/or liquidity
 It extends debt sustainability analyses to debt
treatments of non-HIPC countries
 The debt sustainability of the debtor country
is assessed before the negotiation on the
basis of the DSA (IMF and World Bank)
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Paris Club’s achievements since Monterrey
 Paris Club creditors have tried to answer the
needs of developing countries facing different
external debt challenges:
 Restoring debt sustainability of HIPCs
 Treating the debt of other developing
countries facing unsustainable debts or
liquidity crisis
 Adopting emergency measures in case of
natural catastrophes
 Offering sound debt management options
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Debt relief for HIPCs since Monterrey
(figures for the 23 post-completion point countries)
Paris Club debt treatments in the
framework of the HIPC initiative :
7.6 billion dollars (NPV 2006)
Additional bilateral efforts from
Paris Club creditors:
7 billion dollars (NPV 2006)
MDRI : 37.6 billion dollars
(in nominal terms)
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Impact of HIPC debt treatments
 For the 32 HIPCs that have reached the
decision point, debt service was 5% of
exports in 2007, compared to 16.6% of
exports in 2000.
 Moreover, poverty-reducing expenditures in
post decision point HIPCs represented 9.4%
of GDP in 2007, compared to 6.8% of GDP in
2000.
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9 countries have been treated under the Evian
approach since Monterrey
 Sustainable cases
 Kenya (January 2004)
 Dominican Republic
(April 2004 and
October 2005)
 Moldova (May 2006)
 Unsustainable cases
 Iraq (November 2004)
 Kyrgyz Rep. (March
2005)
 Nigeria (October 2005)
 Sustainable cases with
goodwill clauses
 Gabon (June 2004)
 Georgia (July 2004)
 Grenada (May 2006)
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Impact of Evian approach treatments
 Countries that had been granted a
goodwill clause did not need to use it.
Gabon gained access to private
international bond markets.
 Nigeria’s external debt is 2% of its GDP
in 2007, compared to 41% in 2004.
 Iraq’s external debt is 84% of GDP in
2008. It was 379% of GDP in 2004
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Debt treatments in case of natural
catastrophes
 Hurricane Mitch (1998): 3 year moratorium
on debt service for Honduras and
Nicaragua
 Indian Ocean Tsunami (2004): 1 year
moratorium on debt service for Indonesia
and Sri Lanka
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Early repayments to the Paris Club
 The favorable evolution of the economic and
financial situation of emerging countries has lead
some of them to offer an early repayment of their
debt towards the Paris Club.
 The Paris Club supports active debt management
strategies
 The Paris Club accepts to consider offers of early
repayments under two frameworks:
 Early repayment at par (Algeria, Brazil, Macedonia,
Peru, Poland);
 Buyback at market value (Gabon, Jordan, Russia)
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Early repayments to the Paris Club
since the Monterrey Conference
Total nominal value of eligible debt: 70 bn$
Russia
Poland
Algeria
Peru
Brazil
Jordan
Gabon
Macedonia
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New challenges ahead
 Full implementation of debt relief efforts
 Litigation against HIPCs
 Creditors coordination
 Long-term debt sustainability
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Full implementation of debt relief efforts
is critical
 Full delivery by all non Paris Club bilateral creditors and
private creditors of their share of efforts is an important
objective
 Some private creditors use aggressive litigation to
obtain the full payment of their claims on HIPCs
 This is harmful for debtors :
 they can be deprived of the full benefit of HIPC
initiative
 some of their foreign assets or exports can be seized
by litigating creditors.
 Paris Club has undertaken measures to tackle
aggressive litigation against HIPC but the challenge
remains
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Paris Club creditors look forward increased
inter-creditors coordination
 Paris Club creditors acknowledge the rising role of
private creditors and emerging bilateral creditors.
 Paris Club creditors already have regular contacts with
representatives of the private sector.
 Some non Paris Club creditors participate regularly to
Paris Club negotiations.
 An enhanced dialogue is needed with emerging lenders.
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Debt sustainability is a key
long-term challenge
 The HIPC and MDRI initiatives obviously strengthened
the debt sustainability of HIPCs.
 However, debt sustainability analyses from the IMF and
World Bank show that some post debt-relief countries
are already at medium risk or high risk of debt distress.
 This is not a mark of failure of HIPC and MDRI initiatives
but reflects the persisting weakness of those countries’
external resources.
 Sustainable lending and borrowing policies are the only
ways to prevent a new debt crisis
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www.clubdeparis.org
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