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As the Paris Club is not an institution, creditor countries that participate in the debt treatment sign an Agreed Minute, which is a recommendation to their governments to negotiate and sign a legally-binding bilateral agreement with the debtor country.
The terms and conditions applying to interest are defined in the context of these bilateral negotiations. In practice, the Agreed Minutes provide three types of guidelines for defining the interest rates in the bilateral agreements:
- When reference is made to the appropriate market rate, the interest rate is based upon standard interest rates of the currency considered, plus a management fee. This rate may be fixed or variable and does not include a country-risk premium.
- When reference is made to late interest, the interest rate applied also includes a penalty on top of the appropriate market rate.
- When reference is made to interest rates at least as favourable than the original concessional interest rate, the interest rate to be applied is the lower of the original concessional rates of the credits restructured and the current appropriate market rate.
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