As per the media reports, the Paris Club will provide financial assurances to the International Monetary Fund on Sri Lanka’s debt.
- An assurance from the Paris Club, as well as other bilateral creditors, is one of the conditions that Sri Lanka has to fulfil for the IMF to begin disbursing a $2.9 bn bailout package to the island nation that all but collapsed last year under a severe economic crisis.
- On January 16, India became the island nation’s first official creditor — China, Japan, and India are Sri Lanka’s three largest bilateral creditors — to send written financing assurances to the IMF. The Fund’s provisional package of $2.9 billion will be approved by its Board, following similar written assurances from China and Japan.
- Sri Lanka’s debt to China is 52 per cent of its bilateral debt, 19.5 per cent to Japan, and 12 per cent to India. With Japan a member of the Paris Club, Sri Lanka needed assurances from China and India as well.
About Paris Club
- The Paris Club is a group of mostly western creditor countries that grew from a 1956 meeting in which Argentina agreed to meet its public creditors in Paris.
- Their objective is to find sustainable debt-relief solutions for countries that are unable to repay their bilateral loans.
- The Paris Club describes itself as a forum where official creditors meet to solve payment difficulties faced by debtor countries.
- Paris Club creditors provide debt treatments to debtor countries in the form of rescheduling, which is debt relief by postponement or, in the case of concessional rescheduling, reduction in debt service obligations during a defined period (flow treatment) or as of a set date (stock treatment).
- All 22 are members of the group called Organisation for Economic Co-operation and Development (OECD). The members are: Australia, Australia, Belgium, Canada, Denmark, Finland, France, Germany, Ireland, Israel, Japan, Netherlands, Norway, Russia, South Korea, Spain, Sweden, Switzerland, the United Kingdom and the United States.
- A debtor country that signs an agreement with its Paris Club creditors, should not then accept from its non-Paris Club commercial and bilateral creditors such terms of treatment of its debt that are less favourable to the debtor than those agreed with the Paris Club.
