UPDATE 1-Paris Club calls for establishment of Ethiopia creditors committee
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PARIS, July 16 (Reuters) – The Paris Club of Sovereign Creditors on Friday called for the swift formation of a creditors’ committee to restructure Ethiopia’s debt, increasing pressure on China to engage in a new common framework of the G20 to provide debt relief to poor countries.
Chad, Ethiopia and Zambia are so far the only countries to have requested debt relief within the framework of the G20 which defines the way to accept debt restructuring under the same conditions for all creditors, whether public or private.
Before debt negotiations can take place, a country seeking debt relief must first agree on an economic program with the International Monetary Fund aimed at restoring sound public finances.
A committee involving the principal public creditors of the debtor country must then be formed and they must propose a debt relief plan in accordance with the guidelines of the International Monetary Fund.
Paris Club president Emmanuel Moulin told reporters that forming a creditors committee for Ethiopia was complex because a creditor needed formal internal approval to proceed.
Moulin did not name China, but it is Ethiopia’s largest creditor and a source familiar with the situation said Beijing is still on the sidelines.
“We have expressed urgent concerns, which are shared with the International Monetary Fund. We are doing our utmost to form a creditors committee as soon as possible to process Ethiopia’s claim, ”said Moulin.
He added that Ethiopia’s current program with the IMF expired in September, making it all the more important to secure a debt relief plan in the coming weeks.
While the process drags on for Ethiopia, the case of Chad is more advanced, with the formation of a creditors’ committee and the establishment of debt relief guidelines supported by the IMF.
Moulin said the Paris Club was ready to reschedule Chad’s debt over a long period, but expected a large private creditor who is currently keen to do the same.
He did not name the private creditor, but about 40% of Chad’s $ 2.8 billion external debt at the end of 2019 was owed to commercial creditors, mostly made up of an oil-backed loan from the trader. Swiss commodity Glencore.
Zambia, which has been in default since November last year after the coronavirus pandemic added to its long-standing debt problem, made little progress at the G20 ahead of the August elections. (Reporting by Leigh Thomas; Editing by Alison Williams and Catherine Evans)