Evaluation of Paris Club

Eline, Neil and Ben

What is the Paris Club?

❖An informal group of officials from creditor countries whose role is to find coordinated and sustainable solutions to the payment difficulties experienced by debtor countries.

❖Started in 1956❖Main goal is debt relief

Members

❖Permanent members: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Ireland, Israel, Italy, Japan, the Netherlands, Norway, the Russian Federation, Spain, Sweden, Switzerland, the United Kingdom and the United States of America.

❖They want to promote economic development and free trade if they owe debt

❖They want to invest in their own countries if they owe debt

What Have They Done?

❖Paris Club has helped 90 different countries eliminate a total of 583 billion dollars of debt.

❖They have also made a total of 432 separate agreements

Notable Recent Examples

❖In May 2014, Paris Club made a deal with Argentina to clear 9.7 billion dollars of its foreign debt after it defaulted in 2001.

❖In January 2013, Burma had 50% of its debt cancelled, which comes to 7.5B$. They then have to pay off the remaining debt over 15 years with a 7 year grace period.

❖In November 2004, Paris Club agreed to cancel a total of 80% of Iraq’s foreign debt. This plan was meant to span over 4 years and relieve their 38.9B$ debt to 7.8B$.Argentine Minister of

Economic Affairs discussing Paris Club

debt relief

Methods for Debt Relief

3 Main Methods:

1.Lower interest rates

2.Prolonged periods of time to pay off debt

3.Haircuts

MDGs

The Paris Club Initiative targets MDG #1, namely eradicating extreme poverty and hunger, and MDG #8, creating a global partnership for development.

How has the Paris Club Decreased Disparity?

❖Countries suffering from conflict/natural disasters

❖Reducing Disparity in HIPCs

❖Cycle of Debt

❖Debt Sustainability

❖Debtor Countries Requirements

❖Promotion of Investment

❖Moral Perspective

How has the Paris Club Increased Disparity?

Issues with Group Itself

❖Transparency

❖Eligibility

❖Too Little Relief

❖Time, SAPs, Cut-off dates

❖Creditors’ Power

How has the Paris Club Increased Disparity?

Issues with Debt Relief

❖Other Efforts

❖Reliance

❖Debt Sustainability

❖Sustainable Economic Growth

❖Small Economies

Is high debt ratio cause or symptom of low growth?

Websites

❖ · http://www.voanews.com/content/cuba-paris-club-debt-total/2813010.html❖ · http://www.dri.org.uk/pdfs/EngPub3_Paris_Club.pdf❖ · http://www.worldhunger.org/articles/global/debt/caritas3.htm❖ · https://www.imf.org/external/np/speeches/2006/061406.htm❖ · http://www.euromoney.com/Article/1004144/Paris-Club-comes-under-attack.html❖ · https://en.wikipedia.org/wiki/Paris_Club#Criticism_of_the_Paris_Club❖ · https://www.gsb.stanford.edu/insights/economic-analysis-debt-relief-doesnt-help-small-countries❖ · http://www.carnegiecouncil.org/publications/articles_papers_reports/10002.html

❖ http://www.investopedia.com/terms/d/debt-relief.asp