Rescheduling and cancellation
Throughout its existence, the Paris Club has aimed to produce agreements that lead to levels of payments sustainable for the debtor. Over time, practice and theory have developed, and two trends have emerged in the terms of Paris Club agreements:
- Longer repayment periods have been considered. In early Paris Club agreements, repayment terms did not exceed ten years including a grace period (in which only payments of interest on the consolidation are due). For poorer countries, these terms have been constantly extended. The maximum repayment period is now 23 years (including 6 years of grace) for commercial loans and 40 years (including 16 years of grace) for official development aid loans.
- Debt cancellation has been increasingly used. The first concessional agreement was concluded with Mali in 1988 under the Toronto terms (33,33% cancellation). The cancellation rate has been regularly raised, achieving 90% or more when necessary to reach debt sustainability in the framework of the Heavily Indebted Poor Countries Initiative.
If Paris Club treatments are defined on a case by case basis, most of them are however based on pre-defined categories and fall under two main frameworks: the Heavily Indebted Poor Countries Initiative and the Evian approach.
In case of crisis, the Paris Club has also granted exceptional debt treatments.