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 ❖ 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?

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