Paris Club group of Creditors

Facts for Prelims

Paris Club group of Creditors

News: Recently, Sri Lanka has reached an “agreement in principle” with India and the Paris Club group of creditors, including Japan, on a debt treatment plan.

What is the Paris club?
• The Paris Club is an informal group of creditor nations that provides a forum where official creditors meet to solve payment difficulties faced by debtor countries1. It was formed from a 1956 meeting in which Argentina agreed to meet its public creditors in Paris.
• The members of the Paris Club are mostly western countries, and all 22 are members of the Organisation for Economic Co-operation and Development (OECD).
• The Paris Club’s objective is to find sustainable debt-relief solutions for countries that are unable to repay their bilateral loans.

Significance of agreement:
• It is expected to facilitate the release of the next tranche of the International Monetary Fund‘s nearly $3 billion recovery package for Sri Lanka.
• At the height of last year’s economic crisis, Sri Lanka defaulted on its nearly $51 billion foreign debt, leading to the need for comprehensive loan restructuring.