The Paris Club is an informal group of official creditors whose role is to find coordinated and sustainable solutions to the payment difficulties experienced by debtor countries.
It was established in 1956 when Argentina agreed to meet its public creditors in Paris.
The Paris Club has 22 permanent members, including most of the Western European and Scandinavian nations, the United States, the United Kingdom, and Japan.
The group treats debts due by governments of debtor countries and certain private sector entities as guaranteed by the public sector to Paris Club members.
It offers a standard set of tiered terms for debt treatment, ranging from rescheduling of payments at market rates to cancellation of up to 90% of certain debts.
The Paris Club's goal is to avoid debt crises and resulting international tensions that have historically led to military interventions and other forms of political instability.
The primary focus of the Paris Club is to negotiate and restructure the official debt of countries in financial distress. Member countries meet periodically to discuss and negotiate debt rescheduling or restructuring agreements with debtor countries.
These negotiations aim to provide the debtor country with some relief, such as extended repayment periods, reduced interest rates, or even debt cancellation in some cases.
The Paris Club works closely with international financial institutions like the International Monetary Fund (IMF) and the World Bank to coordinate their efforts in providing financial assistance and promoting economic stability in debtor countries.
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 that will help the crisis-hit island nation tap the next tranche of the International Monetary Fund’s nearly-$3 billion recovery package.
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