What Is the Paris Club?

The Paris Club is an informal group of creditor nations whose objective is to find workable solutions to payment problems faced by debtor nations. The Paris Club has 19 permanent members, including most of the western European and Scandinavian nations, the United States of America, the United Kingdom and Japan. The Paris Club stresses the informal nature of its existence and deems itself a "non-institution." As an informal group, it has no official statutes and no formal inception date, although its first meeting with a debtor nation was in 1956, with Argentina.

Key Takeaways

  • The Paris Club is an informal group of creditor nations who meet each month in the French capital whose objective is to find workable solutions to payment problems faced by debtor nations.
  • The group is organized around the principles that each debtor nation be treated case by case, with consensus; conditionality, solidarity, and comparability of treatment.
  • In addition to 19 member nations, there exist observers, who are often international NGOs, who attend but cannot participate in the meetings.

Paris Club

Understanding the Paris Club

The members of the Paris Club meet each month in the French capital, except for the months of February and August. These monthly meetings may also include negotiations with one or more debtor countries that have met the Club's pre-conditions for debt negotiation. The main conditions a debtor nation has to meet are that it should have a demonstrated need for debt relief and should be committed to implementing economic reform, which in effect means that it must already have a current program with the International Monetary Fund (IMF) supported by a conditional arrangement.

The Paris Club has five key functioning principles:

  1. Case by case
  2. Consensus
  3. Conditionality
  4. Solidarity
  5. Comparability of treatment.

The Paris Club treats debts due by governments of debtor countries and certain private sector entities as guaranteed by the public sector to Paris Club members. A similar process occurs for public debt held by private creditors in the London Club, which was organized in 1970 on the model of the Paris Club.

Since 1956, the Paris Club has signed 433 agreements with 90 different countries covering over $583 billion.

Creditor countries meet ten times a year in Paris for Tour d'Horizon and negotiating sessions. To facilitate Paris Club operations, the French Treasury provides a small secretariat, and a senior official of the French Treasury is appointed chairman.

Three Categories of Paris Club Observers

Observers may attend negotiating sessions of the Paris Club, but they cannot participate in the session.

1. Representatives of international institutions:

  • International Monetary Fund (IMF)
  • World Bank
  • Organisation for Economic Co-operation and Development (OECD)
  • United Nations Conference on Trade and Development (UNCTAD)
  • European Commission
  • African Development Bank
  • Asian Development Bank
  • European Bank for Reconstruction and Development (EBRD)
  • Inter-American Development Bank (IADB)

2. Representatives of permanent members of the Paris Club, which are free of conflicts of interest with debtors or not creditors of the debtor country.

3. Representatives of non-Paris Club countries which have claims on the debtor country, but are not in a position to sign the Paris Club agreement as ad hoc participants, provided that permanent members and the debtor country agree on their attendance.