Information about Sub-Saharan Africa África subsahariana
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V Debt Restructuring by Official Bilateral Creditors

Author(s):
International Monetary Fund
Published Date:
March 1998
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Paris Club Reschedulings, August 1995–September 1997

Since August 1995, Paris Club creditors have concluded 23 rescheduling agreements, involving debt-service obligations and arrears amounting to $58 billion (Table 13)21. Among these, 5 agreements were concluded on middle-income (nonconcessional) terms, and 18 agreements were reached with low-income countries on Naples (concessional) terms.22

Table 13.Paris Club Reschedulings of Official Bilateral Debt, 1995–September 1997(In chronological order)
Debtor Countries1Date of Agreement M/D/YAmount Consolidated2Type of Debt Consolidated2,3Consolidation PeriodTerms4
Not previously rescheduledPreviously rescheduledGraceMaturity
(In millions of U.S. dollars)(In months)(In years)
1995
Guinea IV01/25/1995156PIALPartial PIAL12Naples terms5
Cambodia I01/26/1995249PIALPIAL30Naples terms
Chad II02/28/199524PIALPIAL12Naples terms
Uganda VI02/20/1995110StockNaples terms
Togo X02/23/1995237Partial PIAL33Naples terms
Guinea-Bissau III02/23/1995195PIALPIAL36Naples terms
Croatia I03/21/1995861ALPAL12214
Nicaragua II03/22/1995783PIALPartial PI27Naples terms6
Bolivia V03/24/1995482PIALPartial PIAL36Naples terms6
Senegal XI04/20/1995169PIALPartial PIAL29Naples terms
Haiti I05/30/1995117PIAL13Naples terms
Russia III706/03/19956,400PIPartial I12315
Mauritania VI06/28/199566PIPartial PI36Naples terms
Macedonia, former Yugoslav Rep. of I07/17/1995288PIALPIAL12315
Algeria II07/21/19957,320PI368315
Cameroon IV11/16/19951,129PIALPIAL12Naples terms5,6
Gabon VII9,1012/12/19951,030PIALPartial PIAL36215
Bolivia VI12/14/1995881StockStockNaples terms
1996
Zambia VI1002/28/1996566PIAPIA36Naples terms
Honduras III03/01/1996112PIAPartial P13Naples terms5
Sierra Leone VII03/28/199639PIPIAL24Naples terms
Ghana (terms of reference rescheduling (TOR)) I04/07/199693Partial A03
Russia IV704/29/199640,20011PIP39423
Mali IV05/20/199633StockStockNaples terms
Guyana IV05/23/1996793StockStockNaples terms
Chad (TOR) III1006/14/199612PIALPIAL32Naples terms
Burkina Faso III06/20/199664StockStockNaples terms
Congo, Democratic Rep. of IV1007/16/19961,758PIALPIAL36Naples terms6
Peru VI07/20/19966,72411PIPI33118
Yemen, Rep. of I09/24/1996113PIA10Naples terms6
Benin IV10/25/1996209StockStockNaples terms
Mozambique V11/21/1996664PIALPI32Naples terms
Niger IX12/19/1996128PIAPIA31Naples terms
1997
Tanzania V1001/21/19971,608PIALPIAL36Naples terms
Ethiopia II01/24/1997184PIAL34Naples terms
Guinea V02/26/1997123PIALPIAL36Naples terms5
Madagascar VIII03/26/19971,247PIALPartial PIAL35Naples terms
Jordan IV05/23/1997400PIALPartial PIAL21317.5
Sources: Agreed Minutes of debt reschedulings; Paris Club Secretariat; and IMF staff estimates.

Roman numerals indicate, for each country, the number of debt reschedulings in the period beginning 1976.

Includes debt service formally rescheduled as well as deferred.

Key: P = principal; I = interest; A = arrears on principal and interest; L = late interest. P, I, and A are on pre-cutoff date medium- and long-term debt.

Terms for consolidated debt, calculated from the midpoint of the consolidation period plus six months; terms for deferred amounts, if any, tend to be shorter.

Naples terms with a 50 percent net present value reduction.

Some creditors chose the nonconcessional long-maturities option.

Creditors met under the chairmanship of the Group of Participating Creditor Countries.

Principal payments were consolidated over 36 months, and interest payments due were consolidated over 12 months.

Gabon’s 1991 rescheduling agreement (Gabon V) was declared null and void.

Agreement featured an entry-into-force clause.

Including a reprofiling of the stock of certain debts at the end of the consolidation period.

Sources: Agreed Minutes of debt reschedulings; Paris Club Secretariat; and IMF staff estimates.

Roman numerals indicate, for each country, the number of debt reschedulings in the period beginning 1976.

Includes debt service formally rescheduled as well as deferred.

Key: P = principal; I = interest; A = arrears on principal and interest; L = late interest. P, I, and A are on pre-cutoff date medium- and long-term debt.

Terms for consolidated debt, calculated from the midpoint of the consolidation period plus six months; terms for deferred amounts, if any, tend to be shorter.

Naples terms with a 50 percent net present value reduction.

Some creditors chose the nonconcessional long-maturities option.

Creditors met under the chairmanship of the Group of Participating Creditor Countries.

Principal payments were consolidated over 36 months, and interest payments due were consolidated over 12 months.

Gabon’s 1991 rescheduling agreement (Gabon V) was declared null and void.

Agreement featured an entry-into-force clause.

Including a reprofiling of the stock of certain debts at the end of the consolidation period.

Among the 30 middle-income countries that have rescheduled debt with Paris Club creditors during the last two decades, 23 countries have graduated from rescheduling and 4 countries (Algeria, Jordan, Peru, and Russia) are expected to graduate at the end of their current consolidation periods (Table 14), Their exit from rescheduling reflects the significant progress in macroeconomic stabilization and structural reform that contributed to improved access by many middle-income countries to private foreign financing. During the period under review, the Paris Club concluded five rescheduling agreements on middle-income terms (Gabon, Ghana, 23 Jordan, Peru, and Russia).

Table 14.Status of Paris Club Rescheduling Countries as of September 30, 1997
Low-Income1Lower-Middle-Income2Other Middle-IncomeTotal
Countries that graduated from reschedulings3
**Benin10/96Dominican Rep.3/93Argentina3/95
**Cambodia6/97Ecuador12/94Bulgaria4/95
Gambia, The9/87Egypt6/94Brazil8/93
#**Guyana5/96El Salvador9/91Chile12/88
**Haiti3/96Ghana4/964,5Costa Rica6/934
Malawi5/89Guatemala3/93Croatia12/95
#**Mali5/96Jamaica9/954Macedonia, former Yugoslav Rep. of6/96
*Vietnam12/934Kenya1/944,6
Morocco12/92Mexico5/92
Philippines7/947Panama3/92
Poland4/91Romania12/83
Trinidad and Tobago3/91
Turkey6/83
Number of countries8111231
Countries with rescheduling agreements in effect
+**Bolivia12/95Gabon11/98Algeria5/98
+**Burkina Faso6/96Jordan2/99Russia3/998
**Chad8/98Peru12/988
**Congo, Rep. of6/99
**Ethiopia10/99
**Guinea12/999
**Guinea-Bissau12/97
**Madagascar11/99
**Mauritania12/97
**Mozambique6/99
**Niger6/99
**Senegal12/97
**Sierra Leone12/97
**Tanzania11/9910
**Togo9/97
+**Uganda2/95
**Zambia12/98
Number of countries173222
Countries with previous rescheduling agreements, but without current rescheduling agreements, that have not graduated from reschedulings
Angola9/90Nigeria3/92Yugoslavia116/89
**Cameroon9/969
*Central African Rep.3/95
Congo, Democratic Rep. of6/9012
+*Côte d’lvoire3/97
*Equatorial Guinea2/96
**Honduras1/979
Liberia6/85
**Nicaragua6/97
Somalia12/88
Sudan12/84
Yemen, Rep. of6/97
Number of countries121114
All countries37151567
Source: Paris Club.Note: Includes agreements of Russia and Turkey with official bilateral creditors; stock treatment underlined. Dates refer to end of current or last consolidation period. In the case of a stock-of-debt operation, canceled agreements, or rescheduling of arrears only, date shown is that of relevant agreement.

* denotes rescheduling on London terms, and ** denotes rescheduling on Naples terms. + denotes countries for which Paris Club creditors have indicated their willingness to provide debt relief on Lyon terms in the context of the HI PC Initiative. # denotes stock treatment subject to decisions (not yet made) on eligibility for assistance under HIPC Initiative.

Defined here as countries that obtained lower-middle-income but not concessional terms with Paris Club reschedulings.

For some countries, this inevitably represents an element of judgment: in certain circumstances, for example, if hit by an external shock, a country may need further reschedulings. Some of the low-income countries may be eligible for enhanced action under the HIPC Initiative.

Rescheduling of arrears only.

Limited deferral of long-standing arrears to three creditors on nonconcessional terms.

Nonconcessional rescheduling at the authorities’ request.

The 1994 rescheduling agreement was canceled at the authorities’ request.

Agreement includes a reprofiling of the stock of certain debts at the end of the consolidation period.

Involved debt relief of 50 percent in NPV terms.

Agreement subject to entry-into-force clause.

Former Socialist Federal Republic of Yugoslavia.

Last rescheduling on Toronto terms.

Source: Paris Club.Note: Includes agreements of Russia and Turkey with official bilateral creditors; stock treatment underlined. Dates refer to end of current or last consolidation period. In the case of a stock-of-debt operation, canceled agreements, or rescheduling of arrears only, date shown is that of relevant agreement.

* denotes rescheduling on London terms, and ** denotes rescheduling on Naples terms. + denotes countries for which Paris Club creditors have indicated their willingness to provide debt relief on Lyon terms in the context of the HI PC Initiative. # denotes stock treatment subject to decisions (not yet made) on eligibility for assistance under HIPC Initiative.

Defined here as countries that obtained lower-middle-income but not concessional terms with Paris Club reschedulings.

For some countries, this inevitably represents an element of judgment: in certain circumstances, for example, if hit by an external shock, a country may need further reschedulings. Some of the low-income countries may be eligible for enhanced action under the HIPC Initiative.

Rescheduling of arrears only.

Limited deferral of long-standing arrears to three creditors on nonconcessional terms.

Nonconcessional rescheduling at the authorities’ request.

The 1994 rescheduling agreement was canceled at the authorities’ request.

Agreement includes a reprofiling of the stock of certain debts at the end of the consolidation period.

Involved debt relief of 50 percent in NPV terms.

Agreement subject to entry-into-force clause.

Former Socialist Federal Republic of Yugoslavia.

Last rescheduling on Toronto terms.

In contrast, less than one-fourth of the 37 low-income rescheduling countries have graduated from the rescheduling process, reflecting in part the severity of their debt burdens, but also, in many of them, an uneven pace of macroeconomic stabilization and structural reform. Of the 18 agreements on Naples terms with low-income countries over the last two years, 5 were stock-of-debt operations, all with a 67 percent reduction of eligible debt in net present value (NPV) terms, and 13 were flow reschedulings—10 reschedulings involved a 67 percent NPV reduction of eligible debt, and 3 reschedulings involved a 50 percent NPV reduction. All flow reschedulings contained goodwill clauses for future reschedulings, mostly for stock-of-debt operations, improving these countries’ prospects—subject to a good track record in both macroeconomic policies and payments to creditors—for exiting from the rescheduling process in due course. These prospects have been significantly enhanced by the adoption of the Initiative for the Heavily Indebted Poor Countries (HIPC Initiative) (see Appendix I). Under this Initiative, the international financial community is committed to providing exceptional financial assistance to eligible countries that implement ambitious adjustment and reform policies so as to reduce their debt burdens to sustainable levels and improve their growth prospects. In the context of the HIPC Initiative, Paris Club creditors have agreed to increase the degree of debt relief on eligible debt to up to 80 percent in NPV terms (see Table 15).

Table 15.Evolution of Paris Club Rescheduling Terms
Middle-Income CountriesLower-Middle-Income Countries (Houseton terms)1Low-Income Countries2
Naples terms4 options
DSR
Toronto terms optionsLondon terms3 optionsMaturing flowsLyon terms5 options
DRDSRLMDRDSRCMILMDRStocksCMILMDRDSRCMILM
ImplementedSince Sept.1990Oct. 1988–June 1991Dec.1991–Dec.1994Since January 1995Since December 1996
Grace (in years)5-61Up to 818814651666382068820
Maturity (in years)9115114142523232325233333334023404040
Repayment scheduleFlat/graduatedFlat/graduatedFlatGraduatedGraduatedGraduated
Interest rate7MMMR8MMR9R9MMR10R10R10MMR11R11M
Reduction in net present value (in percent)3320–301250505067676767808080
Memorandum items
ODA credits
Grace (in years)5–6Up to 1014141412121216161616162016161620
Maturity (in years)102025252530303025404040404040404040
Source: Paris Club.

Since the 1992 agreements with Argentina and Brazil, creditors have made increasing use of graduated payment schedules (up to 15 years’ maturity and 2–3 years’ grace for middle-income countries; up to 18 years’ maturity for lower-middle-income countries).

DR refers to the debt-reduction option; DRS to the debt-service-reduction option: CMI denotes the capitalization of moratorium interest: LM denotes the nonconcessional option providing longer maturities. Under London. Naples, and Lyon terms, there is a provision for a stock-of-debt operation, but no such operation took place under London terms.

These have also been called “enhanced Toronto” and “enhanced concessions” terms.

Most countries are expected to secure a 67 percent level of concessionality; countries with a per capita income of more than $500 and an overall indebtedness ratio in net present value terms of less than 350 percent of exports may receive a 50 percent level of concessionality; decided on a case-by-case basis. For a 50 percent level of concessionality, terms are equal to London terms, except for the debt-service-reduction option under a stock-of-debt operation that includes a three-year grace period.

These terms are to be granted in the context of concerted action by all creditors under the H1PC Initiative. They also include, on a voluntary basis, an ODA debt-reduction option.

Fourteen years before June 1992.

Interest rates are based on market rates (M) and are determined in the bilateral agreements implementing the Paris Club Agreed Minute. R = reduced rates.

The interest rate was 3.5 percentage points below the market rate or half of the market rate if the market rate was below 7 percent.

Reduced to achieve a 50 percent net present value reduction.

Reduced to achieve a 67 percent net present value reduction; under the DSR option for the stock operation, the interest rate is slightly higher, reflecting the three-year grace period.

Reduced to achieve an 80 percent net present value reduction.

The reduction of net present value depends on the reduction in interest rates and therefore varies. See footnote 8.

Source: Paris Club.

Since the 1992 agreements with Argentina and Brazil, creditors have made increasing use of graduated payment schedules (up to 15 years’ maturity and 2–3 years’ grace for middle-income countries; up to 18 years’ maturity for lower-middle-income countries).

DR refers to the debt-reduction option; DRS to the debt-service-reduction option: CMI denotes the capitalization of moratorium interest: LM denotes the nonconcessional option providing longer maturities. Under London. Naples, and Lyon terms, there is a provision for a stock-of-debt operation, but no such operation took place under London terms.

These have also been called “enhanced Toronto” and “enhanced concessions” terms.

Most countries are expected to secure a 67 percent level of concessionality; countries with a per capita income of more than $500 and an overall indebtedness ratio in net present value terms of less than 350 percent of exports may receive a 50 percent level of concessionality; decided on a case-by-case basis. For a 50 percent level of concessionality, terms are equal to London terms, except for the debt-service-reduction option under a stock-of-debt operation that includes a three-year grace period.

These terms are to be granted in the context of concerted action by all creditors under the H1PC Initiative. They also include, on a voluntary basis, an ODA debt-reduction option.

Fourteen years before June 1992.

Interest rates are based on market rates (M) and are determined in the bilateral agreements implementing the Paris Club Agreed Minute. R = reduced rates.

The interest rate was 3.5 percentage points below the market rate or half of the market rate if the market rate was below 7 percent.

Reduced to achieve a 50 percent net present value reduction.

Reduced to achieve a 67 percent net present value reduction; under the DSR option for the stock operation, the interest rate is slightly higher, reflecting the three-year grace period.

Reduced to achieve an 80 percent net present value reduction.

The reduction of net present value depends on the reduction in interest rates and therefore varies. See footnote 8.

Paris Club creditors agreed in June 1996 to double the amount of commercial debt of low-income and lower-middle-income countries that creditors can convert (swap) on a voluntary basis.24 Also, creditors have made more frequent use of en try-in to-force clauses than in the past.25

Discussions between Russia and Paris Club creditors about Russia’s participation in reschedulings as a creditor have advanced significantly; an understanding was reached in June 1997 on the basis of Russia’s participation, which was finalized in September 1997. The agreement provides for up-front discounts on Russian claims on rescheduling countries, to make them comparable to claims of traditional Paris Club creditors. This involves a differentiation between debtors, with a larger discount for the poorest countries. The post-discount claims will then be subject to the same terms as granted by the Paris Club. This agreement will facilitate the regularization of Russian claims on developing countries (estimated at $123 billion)26 and the implementation of the HIPC Initiative for countries with large debts to Russia.

Box 4.Rescheduling Agreement with the Russian Federation, April 1996

An agreement was reached on April 29, 1996 between Russia and official bilateral creditors meeting as the Group of Participating Creditor Countries on an exit rescheduling covering about $40 billion. It consists of a multiyear rescheduling agreement (MYRA) for the period from January 1996 to March 1999 and a subsequent stock treatment (reprofiling) of previously rescheduled debt. Both these elements were on nonconcessional terms.

The MYRA covered (1) 100 percent of principal and interest (excluding late interest) falling due from January 1, 1996 to December 31, 1998 on pre-cutoff date debt that had not been rescheduled previously;1 (2) 40 percent of such payments falling due in the first quarter of 1999: and (3) 100 percent of principal falling due from January 1, 1996 to March 31, 1999 on amounts consolidated under the previous rescheduling agreements (1993, 1994, and 1995). Payment of the rescheduled amounts is to be made in 38 semiannual graduated payments starting on February 20, 2002 and ending in 2020.

In addition, the agreement provides for a deferral of (1) 100 percent of principal and interest (excluding late interest) falling due from January 1, 1996 to December 31, 1998 on debts contracted in 1991; (2) 100 percent of deferred principal payments falling due from January 1, 1996 to March 31, 1999 on short-term debt, debts contracted in 1991, and moratorium interest capitalized under the 1994 and 1995 rescheduling agreements; and (3) 100 percent of deferred principal payments falling due from January I, 1996 to December 31, 1996 on moratorium interest capitalized under the 1993 rescheduling agreement. Deferred amounts are to be paid in 30 semiannual graduated payments starting on February 20, 2002 and ending in 2016.

Provided that the Extended Fund Facility (EFF) arrangement is on track (with completion of the final quarterly review scheduled under the arrangement) and that all payments under the agreement have been made, (1) outstanding amounts as of April 1, 1999 of principal on pre-cutoff date debt consolidated under the previous rescheduling agreements (1993, 1994, and 1995) will be reprofiled and are to be repaid in 38 semiannual graduated payments starting on February 20, 2002 and ending in 2020; and (2) outstanding amounts of deferred principal payments on short-term debt, debts contracted in 1991, and moratorium interest capitalized under the previous rescheduling agreements (1993, 1994, and 1995)2 will be reprofiled and are to be repaid in 30 semiannual graduated payments starting on February 20, 2002 and ending in 2016.

Unlike the previous rescheduling agreements, there is no capitalization of moratorium interest. All other amounts due and not covered by the agreement are to be paid on their due dates, while arrears outstanding as of the date of the present agreement, if any, were to be paid as soon as possible and not later than June 30, 1996.

A termination clause linked to the EFF arrangement would allow creditors, after consultation with the Russian authorities, to terminate the agreement if the scheduled 1996 quarterly reviews tinder the EFF arrangement were not completed; in the event, all these reviews were completed. A trigger clause links the continued application of the agreement to approval of the annual arrangements under the EFF arrangement for 1997 and 1998 as well as the completion of the final quarterly review scheduled under the EFF arrangement.

1The cutoff date is January 1, 1991.2Except for moratorium interest capitalized under the 1993 rescheduling agreement.

Rescheduling Agreements on Middle-Income Terms

There were five rescheduling agreements on middle-income terms during the period under review. These included the multiyear exit rescheduling agreements with Russia in April 1996 (see Box 4), the largest in the history of the Paris Club, covering about $40 billion, and with Peru in July 1996 (see Box 5). Reflecting concerns over the longer-term debt-service profiles, these agreements included a reprofiling of the stock of certain debts at the end of the consolidation periods, Gabon27 obtained a three-year flow rescheduling in December 1995. In May 1997, Jordan received an exit flow rescheduling covering maturities falling due during June 1997–February 1999, the remaining period of the Extended Fund Facility (EFF) arrangement with the IMF, The agreement with Ghana in April 1996, which was on nonconcessional terms at the authorities’ request, provided for a deferral of long-standing arrears to a small number of creditors and was considered to be an exit rescheduling. All reschedulings (except Ghana’s deferral) involved graduated payment schedules with grace periods of 1–4 years and maturities of 15–23 years.

Box 5.Rescheduling Agreement with Peru, July 1996

The agreement constitutes an exit rescheduling for Peru. It consists of (1) a multiyear rescheduling agreement (MYRA) through the end of 1988, and (2) a subsequent reprofiling of the stock of debt due under the 1991 rescheduling agreement with Paris Club creditors; both these elements were on nonconcessional terms. Under the MYRA, some $1.1 billion was covered. Current maturities on pre-cutoff date commercial debt (not previously rescheduled) falling due from April 1, 1996 through December 31, 1998 were rescheduled with declining coverage (100 percent in 1996, 85 percent in 1997, 60 percent in 1998) over 18 years, including 1 year of grace, on a graduated payment schedule.1 Current maturities on pre-cutoff date commercial debt consolidated under previous reschedulings (1991 and 1993) and falling due during the consolidation period were rescheduled on the same terms, but with somewhat lower coverage in 1998 (50 percent). Pre-cutoff date official development assistance (ODA) debt was rescheduled with the same coverage, but over 20 years with 10 years’ grace, and with equal semiannual repayments. Unlike previous reschedulings, there was no capitalization of moratorium interest.

Provided that the Extended Fund Facility (EFF) arrangement is on track (with completion of the last scheduled review) and that all payments under the agreement have been made, maturities due on or after January 1, 1999 that were consolidated under the 1991 Paris Club agreement would be reprofiled; these total some $5.6 billion. Commercial credits would be repaid over 17 years, on a repayment schedule tailored to limit Rent’s payments on currently outstanding Paris Club debt to about $1 billion a year through 2009, declining rapidly thereafter. ODA loans would be repaid over 20 years including a grace period of 1½ years with equal semiannual payments. The agreement contains an acceleration clause under which repayments on reprofiled debt will be increased by 20 percent (and thus accelerated) if cumulative real GDP growth over any of the three five-year periods spanning 1996–2002 exceeds the assumptions in the authorities’ medium-term program by more than 3 percentage points.

All other amounts due and not covered by the agreement were to be paid on their due dates, while arrears outstanding as of the date of the present agreement, if any, were to be paid as soon as possible and not later than October 31, 1996.

A trigger clause links the continued application of the agreement to approval of the annual arrangements for 1997 and 1998 under Peru’s EFF arrangement with the IMF. Also, the government of Peru for three years following the present extended arrangement agreed to maintain a close relationship with the IMF that would include enhanced surveillance and reporting of Pern’s economic policies and performance.

1Annual payments rising gradually through year 16, declining markedly thereafter.

The rescheduled debts in the five reschedulings on middle-income terms amounted to about $22 billion, and the restructurings after the end of the consolidation period covered some $27 billion (Table A7). The net debt relief28 granted during the consolidation periods is estimated at about $19 billion; alter taking into account some $15 billion in debt service due that was not covered by the rescheduling, about half of debt service due during the consolidation period was actually payable.

Rescheduling Agreements on Low-Income (Concessional) Terms

Flow Reschedulings

Recent flow rescheduling agreements with low-income countries were all on Naples terms.29 Most agreements covered consolidation periods up to the expiration of arrangements with the IMF, granted comprehensive coverage of debt, and contained a goodwill clause providing for a future stock-of-debt operation. The degree of concessionality of reschedulings (a 50 percent or 67 percent debt relief in NPV terms) depended on the country’s per capita income and level of overall indebtedness.30 All countries obtained a 67 percent NPV reduction of eligible debt, except Cameroon, Guinea, and Honduras, which received a 50 percent NPV reduction. As in previous reschedulings, Paris Club creditors tailored the extent of debt relief to the financing needs of rescheduling countries by varying the coverage and the extent of “topping-up” (increase in the concessionality) of debt previously rescheduled on concessional terms.

Reflecting standard Paris Club practice, consolidation periods typically covered the remaining period of the IMF arrangements. Most were multiyear consolidations with annual tranches, where the effectiveness of each tranche was linked to, among other criteria, approval by the IMF Board of annual arrangements under the Enhanced Structural Adjustment Facility (ESAF). Cameroon and the Republic of Yemen had shorter consolidation periods (about one year), reflecting shorter IMF arrangement periods. The consolidation period for Honduras coincided with the third annual ESAF arrangement.

Box 6.Naples Terms Flow Rescheduling Agreements Since August 1995

The 13 flow reschedulings under Naples terms generally covered principal and interest on pre-cutoff date debt not previously rescheduled and debt previously rescheduled on nonconcessional terms (except for the interest arising from previously rescheduled debt for Honduras). The coverage of debt previously rescheduled on concessional terms and of arrears on such debts reflected the circumstances of the particular country.

The coverage of debt previously rescheduled on Toronto terms was comprehensive for all countries that had such debts—Chad, Guinea, Madagascar,1 Mozambique, Niger,2 Tanzania,3 and Zambia, Arrears (including late interest) and current maturities were topped up to 67 percent NPV reduction (for Guinea, to 50 percent of NPV reduction).

The coverage and the topping-up of debts previously rescheduled on London terms were less comprehensive. The following countries had such debts—Cameroon, Guinea, Honduras, Mozambique, Niger, Sierra Leone, Tanzania, and Zambia. For Mozambique,4 Niger,2 and Zambia, arrears (excluding late interest) and current maturities were consolidated and topped up to 67 percent of NPV reduction. For Cameroon, Sierra Leone, and Tanzania,3 arrears (including late interest) and current maturities were deferred.5 For Ethiopia. Guinea, and Honduras, no debt relief was provided on debts previously rescheduled on London terms.

In some countries with exceptional financing needs. Paris Club creditors granted nonconcessional deferrals of short-term debts, arrears on post-cutoff date debts, and previous deferrals. Certain short-term payments for Madagascar and Sierra Leone were deferred nonconcessionally. Moratorium interest previously deferred in the 1990 agreement (Toronto terms) for Zambia was deferred again over 10 years with 5 years’ grace. Arrears on post-cutoff date debt were deferred for the following countries: Cameroon—such arrears were deferred with monthly repayments over one year; Chad—one creditor deferred such arrears over three years; Republic of Congo—such arrears, including amounts that were deferred under the 1994 rescheduling agreement, were deferred nonconcessionally over the consolidation period; entry into force of the agreement was linked to the payment of 25 percent of such arrears by end-1996; Mozambique—such arrears were deferred for about 18 months; and Niger—such arrears were deferred for about one year with two semiannual payments.

1For Madagascar, debts from the first, but not from the most recent, agreement on Toronto terms (1990) were consolidated and topped up.2For Niger, late interest on debts previously rescheduled on Toronto and London terms was deferred.3For Tanzania, arrears and debt service arising from deferrals of debts previously rescheduled on Toronto and London terms were not consolidated.4For Mozambique, only debt rescheduled for the first time on London terms, but not previously rescheduled debt, was consolidated.5Terms of deferrals of debts previously rescheduled under London terms were: Cameroon: 17-year maturity, including a 3-year grace period; Sierra Leone: 15-year maturity, including a 3-year grace period; Tanzania: 6-year maturity, including a 3-year grace period.

The coverage of the reschedtiling agreements was typically comprehensive. In almost ail agreements, current maturities and arrears (including late interest) on nonconcessional pre-cutoff date debts were consolidated.31 However, the treatment of current maturities and arrears on debt previously rescheduled on concessional terms varied (see Box 6). Creditors generally expected debtors to honor their last rescheduling agreement, and thus in most cases amounts due under the previous rescheduling agreement were not treated.

Virtually all agreements contained a goodwill clause in which creditors indicated their willingness to consider the debtor country’s stock of debt at the end of the consolidation period—typically after three years—if at that point the country continued to have an appropriate arrangement with the IMF and had fully implemented the rescheduling agreement. The agreement with the Republic of Yemen was that country’s first Paris Club rescheduling and covered a shorter consolidation period than the track record Paris Club creditors require for considering a stock-of-debt clause; its goodwill clause instead provided for a further flow rescheduling. In addition, the agreements with Ethiopia and Mozambique included a clause staling creditors’ willingness to consider these countries’ debt-service obligations again in the context of possible action under the HIPC Initiative.

All agreements contained a standard comparability of treatment clause requiring rescheduling countries to seek reschedulings from non-Paris Club creditors (official bilateral and commercial) on terms at least as favorable as those granted by the Paris Club (information on rescheduling agreements with non-Paris Club official bilateral creditors is provided in the next subsection). This clause has been strengthened for a number of countries with debts to Russia (Ethiopia, Madagascar, and Mozambique).

Box 7.Stock-of-Debt Operations on Naples Terms

Uganda was the first low-income rescheduling country to receive a stock-of-debt operation under Naples terms. The February 1995 terms-of-reference rescheduling provided for 67 percent NPV reduction of all pre-cutoff date debt, excluding the debt previously rescheduled in 1992 on London terms (which had already received 50 percent NPV reduction). The level of concessionality for debt rescheduled in 1989 on Toronto terms, including arrears and late interest, was topped up to 67 percent in NPV terms.

Bolivia received a stock-of-debt operation in December 1995 that covered all eligible debt; a 67 percent NPV reduction was applied to pre-cutoff date debt not previously rescheduled and debt previously rescheduled on nonconcessional terms, while debt previously rescheduled on Toronto and London terms was topped up to a 67 percent NPV reduction from the original levels of concessionality. The agreement applied to debt as of January 1, 1996, and the second and third tranches (covering 1996 and 1997) of the 1995 agreement (a flow rescheduling under Naples terms) were not implemented; the one creditor who took the nonconcessional option under the 1995 agreement switched to the debt-reduction option.

Subsequent stock-of-debt operations were agreed upon for Guyana and Mali in May 1996, Burkina Faso in June 1996, and Benin in October 1996. These covered all eligible debt outstanding and provided for a topping-up to a 67 percent NPV reduction of all debt previously rescheduled on concessional Toronto and London terms. There were only minor exceptions: for Guyana, small amounts of interest deferred under the 1993 London terms agreement were excluded; for Benin, moratorium interest deferred under the 1993 London terms agreement was excluded.

The net debt relief provided by the flow reschedulings with low-income countries during August 1995-September 1997 on debts comprising some $9.3 billion in arrears and maturities falling due during the consolidation periods amounted to some $7.2 billion, and thus debt service payable was only about 22 percent of debt service due (Table A8).

Stock-of-Debt Operations with Low-Income Countries

Since the first stock-of-debt operation on Naples terms was agreed upon with Uganda (1995; see Box 7), five more (Benin, Bolivia, Burkina Faso, Guyana, and Mali) have been concluded, all providing for a 67 percent NPV reduction, with comprehensive coverage. The total amounts reorganized in these five stock operations were about $2 billion (see Table A9).

Box 8.Paris Club “Lyon” Terms

Following the proposals made at the Lyon summit in June 1996, Paris Club creditor countries agreed in November 1996 on modalities for increasing debt relief to up to 80 percent NPV reduction for heavily indebted poor countries.

These terms build on Naples terms. Eligibility is to be decided by creditors on a case-by-case basis for countries eligible for Naples terms, but predicated on (1) a sound track record with the IMF and the Paris Club and continued strong economic adjustment, and (2) a need for more concessional treatment to achieve a sustainable debt situation over the medium term, as measured against benchmarks indicative of debt sustainability, namely, the NPV of debt to exports within the range of 200–250 percent and debt-service ratios in the range of 20–25 percent at the end of the adjustment process. Specific targets in relation to the relevant benchmarks are to be considered in light of country-specific situations, such as concentration and variability of exports, and with particular attention to fiscal indicators of the burden of debt service.

Paris Club creditors agreed to confirm that multilateral institutions and other creditors would make an appropriate and consistent contribution to the common objective of debt sustainability, based on proportional burden sharing (after the full application of Naples terms). Creditors also agreed that due consideration would be given to various categories of debt as appropriate, including an alternative official development assistance debt-reduction option on a voluntary basis.

In principle, stock-of-debt operations on Naples terms are intended to be exit reschedulings. However, the HIPC Initiative that was adopted in the fall of 1996 refined the criteria for external debt sustainability (see Appendix I), and the international financial community agreed to provide enhanced debt relief to eligible countries. Paris Club creditors have indicated their willingness to raise the level of debt relief on eligible debts from 67 percent to 80 percent in NPV terms (Lyon terms; see Box 8) for Uganda—the first country to qualify for enhanced assistance under the HIPC Initiative. The topping-up of debt relief will take place at the completion point (scheduled for April 1998) in the context of equitable burden sharing. Paris Club creditors have made similar commitments for Bolivia, Burkina Faso, and Côte d’Ivoire; for Côte d’Ivoire, they have also agreed to provide a flow rescheduling with NPV debt reduction of up to 80 percent. Of the remaining three countries that received stock-of-debt operations, the Executive Boards of the IMF and the World Bank have decided that Benin’s external debt is sustainable absent any further assistance under the HIPC Initiative; hence, the Paris Club stock-of-debt operation remains an exit rescheduling. The eligibility of Guyana and Mali for assistance under the HIPC Initiative has yet to be decided.

Recent Debt Restructurings with Non-Paris Club Bilateral Creditors

Countries that reschedule debt with Paris Club creditors in the context of IMF-supported programs typically also have debts to other bilateral creditors. Agreements with the Paris Club include provisions requiring these debtors to seek relief on their debt to non-Paris Club bilateral and commercial creditors on terms at least as favorable to the debtor as those granted by Paris Club creditors. Russia was the largest non—Paris Club creditor; it has already reached a number of debt-restructuring agreements with several debtor countries and, in light of the agreement reached in September 1997 (discussed above), is expected to participate as a creditor in Paris Club reschedulings later in 1997. Other non-Paris Club bilateral creditors have also concluded agreements with a few debtor countries as described below (see Table 16).

Table 16.Debt-Restructuring Agreements with Official Bilateral Creditors Not Participating in the Paris Club, Mid-1995–Mid-1997
CreditorDebtorDate of AgreementTotal AmountCoverage1TermsOther
1.AlgeriaGuinea-Bissau7/96$5 millionARepayments over 15 years, including 5 years’ grace, at 2 percent interest.
2.ArmeniaGeorgia6/96$20 millionD, ARepayments over 10 years, including 5 years’ grace, at 4 percent interest.
3.AustriaGeorgia1/97$105 millionD, ARepayments over 15 years, including 5 years’ grace, at 4 percent interest.There was an initial payment of $5 million.
4.ColombiaHonduras12/95$25 millionARepayments over 23 years, at 5.4 percent interest.Short-term debt was converted.
5.CubaGuinea-Bissau1996SDR 4.5 million
6.Czech Rep.Nicaragua96–97$141 million
7.El SalvadorNicaragua96–97$40 million
8.HondurasNicaragua96–97$117 million
9.Iran, Islamic Rep. ofGeorgia11/96$13 millionD, ARepayments over 10 years, including 5 years’ grace, at 4 percent interest.
10.KazakhstanGeorgia7/96$28 millionDRepayment over 10 years, including 5 years’ grace, at 4 percent interest.
Kyrgyz Rep.9/96$7 millionDMutual cancellation of claims.
11.KuwaitGuinea-Bissau7/96KD 3 millionARepayment over 10 years.
12.MexicoNicaragua9/96$1.2 billionAfter a 91 percent discount, the remainder to be repaid over 15 years at an interest rate of LIBOR minus 1½ percent.
13.RussiaAngola11/96$5 billionD, AAfter a 70 percent discount, the remainder to he repaid over 20 years, including 5 years’ grace, at 6 percent interest.Interest payments are capitalized through June 2001.
Kyrgyz Rep.12/96$133 millionDRescheduled over 10 years including 3 years’ grace, at an interest rate of LIBOR.The agreement includes a provision that the effective interest may not exceed 5 percent.
Nicaragua10/96$3.4 billionD, AAfter a 90 percent discount, the remainder to be repaid over 15 years at an interest rate of LIBOR plus 0.4 percent.Includes state, commercial, and financial credits. Total payments are capped at $16 million during the first three years of the agreement.
Nigeria10/96DM 3 billionDBuyback at a discount of 68 percent.Mostly trade-related debt. Buyback effected through private third parties.
Pakistan7/96$200 millionDDebt to be repaid over 25 years at an interest rate of 2.5 percent.Agreement in principle. Russia would use the proceeds to finance imports from Pakistan.
Perumid-1996$1 billionD, ADebt buyback exchanging at face value using Russian commercial debt traded at discount in the secondary market for Russian claims on Peru. This entailed an 87 percent effective discount.Debt covered included state and commercial credits.
Ukraine5/97$3.1 billionD, AThe initial payment of $0.9 billion in 1998 includes $0.5 billion for arrears clearance: the rest to be repaid in annual installments of $98 million, including interest.Government credits were to be repaid by 2007; the figure reported includes future interest payments. Of the initial payment. $0.7 billion was effected in kind, while annual payments equal leasing fees paid by Russia for the use of port facilities.
14.Saudi ArabiaGuinea-Bissau8/96SR 25 millionA+P+IRepayments over 13 years.
15.TurkmenistanArmenia3/96$34 millionARepayment over 6 years at LIBOR plus 0.3 percent.Gas arrears converted into government debt.
Azerbaijan4/95$81 millionARepayment in kind over 4 years at zero interest.Gas arrears converted into government debt.
Georgia3/96$394 millionD, ARepayment over 8 years, including 3 years’ grace at 4 percent interest.10 percent of the stock was written off.
16.TurkeyAzerbaijan6/96$75 millionP+IDeferred to 1998–2000.
Kyrgyz Rep.9/96$41 millionP+IRepayment over 5 years at LIBOR plus 2.5 percent.
17.United Arab EmiratesMauritania8/94UAED 36 millionA, P+IRescheduled over 7 years, at zero interest.Graduated repay menu consolidation period covered 1995–96.
18.UzbekistanGeorgia5/96$1 millionD, ARepayments over 10 years, including 5 years’ grace, at 4 percent interest.
Sources: Debtor countries’ authorities.

D = stock of debt; A = arrears; P = principal; and I = interest.

Sources: Debtor countries’ authorities.

D = stock of debt; A = arrears; P = principal; and I = interest.

Nicaragua and Russia finalized an agreement in October 1996 to restructure all commercial, governmental, and financial claims ($3.4 billion). The agreement provides for a 90 percent up-front reduction of the total debt, with the residual claim to be repaid over 15 years starting in 1997 and carrying an interest rate equal to the London interbank offered rate (LIBOR) plus 0.4 percent; payments over the first three years are capped at $16 million. The November 1996 debt-restructuring agreement with Angola covered Russian claims of some $5 billion; after a 70 percent up-front reduction of the total claims, the residual is to be repaid over 20 years, including a 5-year grace period at a fixed interest of 6 percent (interest charges are to be capitalized through June 2001). Under a debt-exchange agreement, in mid-1996, Peru tendered Russian commercial debt (purchased at a discount in the secondary market) in exchange for the cancellation of Russian claims estimated at $1 billion; the operation entailed an effective discount of more than 85 percent. In a buyback operation through third parties in October 1996, Nigeria purchased DM 3 billion of Russian claims at a 68 percent discount. An agreement in principle was reached with Pakistan in July 1996, rescheduling Russian claims of about $200 million over 25 years; Russia is expected to use the proceeds to finance imports from Pakistan.

In September 1996, Nicaragua concluded an agreement to restructure its debt with Mexico ($1, 2 billion); the agreement incorporated a 91 percent face value reduction, and the remaining debt is to be repaid over 15 years at an interest rate of LIBOR minus 1½ percent. In 1996–97, Nicaragua also concluded agreements on concessional terms with the Czech Republic ($141 million), El Salvador ($40 million), and Honduras ($117 million).

During 1996, Guinea Bissau concluded debt-rescheduling agreements with Algeria ($5 million), Cuba (SDR 4.5 million), Kuwait (KD 3 million), and Saudi Arabia (SR1s 25 million); trade-related debt to Cuba is to be credited against fishing license fees, in late 1994, Mauritania concluded a debt-rescheduling agreement with the United Arab Emirates (Dh 36 million) providing for repayment over seven years at no interest. In December 1995, Honduras reached an agreement with Colombia, rescheduling $25 million in short-term debt arrears over 23 years.

Over the last few years, some of the countries of the former Soviet Union have required debt rescheduling on their rapidly rising external debt, mainly to other countries of the former Soviet Union, providing exceptional financing for adjustment programs supported by IMF arrangements. In the absence of the reference framework provided by a Paris Club agreement, the IMF in some cases coordinated this type of exceptional assistance. The debts restructured were mostly related to energy imports.32Georgia concluded debt-rescheduling agreements during 1996 and 1997 covering $0.7 billion in mostly trade-related debts to Armenia, Austria, the Islamic Republic of Iran, Kazakhstan, Russia. Turkmenistan, and Uzbekistan. Repayment terms were 10–15 years, including a 5-year grace period at a fixed interest rate of 4 percent, except for Turkmenistan, with claims for $0.4 billion, which were rescheduled over 8 years, including a 3-year grace period after a 10 percent debt reduction. Turkmenistan rescheduled its claims in arrears for gas shipments to Armenia in March 1996 ($34 million to be repaid over 6 years at LIBOR plus 0.3 percent) and to Azerbaijan in April 1995 ($81 million to be repaid over 4 years at no interest). Azerbaijan also rescheduled its debt ($75 million) to Turkey in June 1996 with repayments due during 1998–2000, The Kyrgyz Republic concluded debt-rescheduling agreements with Turkey and Russia and a mutual cancellation of claims with Kazakhstan in the last quarter of 1996; the agreement with Russia rescheduled the stock of debt ($133 million) over 10 years, including a 3-year grace period. Russia and Ukraine concluded a debt-restructuring agreement in May 1997 covering $3.1 billion in Russian claims (including future interest) with an original maturity in 2007, including arrears of some $0.5 billion. After an initial payment of $0.9 billion in 1998—a large part of it in kind—the remaining debt would be serviced through the leasing of port facilities and provision of services to the Russian navy on the Crimea, valued at about $100 million a year.

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