Int.loan Clubs

8/8/2019 Int.loan Clubs

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DEBT INSTITUTIONS

y Paris Club

y London Club

y IMF

y Bond Financing


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The ParisClub


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WHAT IS PARIS CLUB?

y History

y Origin

y ItsWorking


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HOW PARIS CLUB WORKS?

y Meetings

y Negotiation meetings


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TheLondon

Club


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LONDON CLUB

y History

y Origin

y ItsWorking


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RESCHEDULING PRINCIPLES FORTHE CLUBS

y Imminent

y Conditionality

y Burden Sharing

y Consensus


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PROCEDURE AND PROTOCOLS

y Do not exceed 1 or 2 days

y A date is set

y Gathering and Preparations

y Debtor GOVT are required to leave the room

y Agreed Minutes


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INTERNATIONAL MONETARYFUNDS (IMF)

y What is IMF?

y What IMF do?

y How IMF do it?


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IMPLICATIONS FOR THE IMFs ROLEy Functions of IMF conditionality underwent significant

changes.

y IMF reaches a provisional agreement that only becomes

operative after the successful conclusion of a Paris Club

rescheduling agreement.


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IMPLICA

TIONS FOR

TH

E IMFsR

OLE(Cont.)

y Paris Club debt relief is insufficient to close the IMF-

projected balance of payments gap & IMF calls fordonors consortium meeting

y IMF was prepared to relax the conditions and

performance criteria normally applied in some situations


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THE EVOLUTION OF PARIS CLUBTERMS

y In the Paris Club negotiations both interest and principalpayments are eligible for rescheduling.

y Paris Club negotiations throughout the pre-1988 period

never rescheduled the entire stock of debt on which the

debtor has defaulted


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A SHIFT TO SUSTAINABILITYCreditor governments could choose among three

alternative sets of rescheduling terms, These sets were

designed to cater for the variety of debt crises

(1) Lower interest rates.

(2) Partial write-offs.

(3) Longer repayment terms (Long Maturity or LM

option).


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THE CHANGING CLIMATES 1980s experience

Private sector

Public sector

Indonasia


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TRENDS IN THE PARIS CLUBy Decreasing number of agreements with middle income

companies.

y Indonesia was the only single middle company.

y Jordan was alone in Paris club.

y 1n 1995 four middle income countries reached

agreements.


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COLLAPSE OF THE SOVIET UNIONy Polands negotiations

y IMF review

y London club negotiations

y Reductions in debt stock


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SOVIET UNIONS DIFFICULTIES

y Sudden shift in trading relationships

y Prices increased to world level from actual terms

y Russia introduce interest free technical credits


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HOUSTON TERMS

y Debt for equity swaps

y Concurrent movements

y Exchange of goods


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RUSSIARESPONSIBILITIES

y Zero option

y Post cut off

y Amortization schedule


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EMERGING ECONOMIES & BONDFINANCE

y Major issues

y a number of highly indebted

y Emerging market borrowers

y Default on bond services payments

y Bond restructuring condition


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IMF DEVELOPMENT

y Bailing in

y Agreement among OECD

y Bond market borrowing


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THE NEED FORA NEW CLUB?

y A Bondholders council

Responsible for restructuring bond debts in time ofcrisis


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TH

E NEED FOR

A

NEW

CLUB?(Cont.)

y Need to recognize:

Countries reluctant to suspend debt service payments on

bonds

Formal agrement between all debt institutes.


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ANY QUESTIONS?

Documents

Int.loan Clubs