What is the Paris Club?
The Paris Club is an informal association of creditors that meets every six weeks in Paris to discuss global debt issues focusing on debt relief for developing countries. The beginnings of this organization date back to the 1950s, when representatives of the Argentine government agreed to meet creditors in Paris to discuss approaches to solve debt problems in Argentina. This organization cooperates with agencies such as the International Monetary Fund with the aim of achieving debt and credit challenges around the world. There are 19 regular members and creditors from other nations are associated with the organization, but are not formal members. The Paris Club at meetings discusses the nations of special concern that have applied for relief or have been credited by the IMF, and talks about ways to rework the debt of these nations to allow them to pay off.u for their stability.
In some cases, members of the Paris Club agree to complete the debt forgiveness, often within the plan to agree with other agencies for assistance and financing. For example, in 2010, for example, all Liberia was forgiven to creditors at the Paris Club. In other cases, partial debt forgiveness, change of interest rates, temporary suspension of interest payments and other assistance measures are available. They are carefully discussed by members because they do not want to endanger their own financial stability by giving up debt collection, but also want to contribute to global economic stability and peace by preventing the development of nations of entry into economic crises.
Members of the Paris Club generally break debtors in many categories, based on factors such as the total amount of the transferred debt, their degree of economic growth and their historical political volatilita. It is used to create sorting to ensure that the most needed country gets help first. Cooperation with international organizations can help the Paris Club's efforts to go further by creating a support framework for countries that seek to result from a significant foreign debt.
Ideally, the Paris Club is to be able to collect all the debts owed. Being flexible about repayment of plans, interest and other matters increases the chance of repayment, even if it can take longer than the country fully repays its debts. One of the concerns is the risk that the country accepts more debt for repayment of debt or deal with a debt that seeks to keep their government functional in loan management.