Paris Club Seizes Pandemic Opportunity to Reclaim Lost Influence
The informal group of creditor nations has been pushed aside by China; post-crisis loan workouts offer a chance to increase its relevance.
Like clockwork through the 1990s, Sufian Beker trekked to Paris to plead for cuts in Ethiopia’s soaring debt. As the war-torn country’s finance minister from 1996 to 2015, Beker had few options other than what’s known as the Paris Club, an informal group of wealthy nations that has bailed out governments from Argentina to Zambia. In 2004 he found himself again in the monumental French Treasury building towering over the Seine—where supplicants typically sought forgiveness for their loans—and walked away with a pledge for $1.3 billion in debt relief. It was the last time Beker made such a trip.
In the years since, China has become the top lender to developing countries, eclipsing the nations of the Paris Club. Once the primary government creditors to the developing world, Paris Club members now account for a bit more than half of what China has lent, according to the Kiel Institute for the World Economy. “The club is not the only forum to solve debt problems anymore,” Beker says.