VII Debt Restructuring by Official Bilateral Creditors

International Monetary Fund
Published Date:
December 1995
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This section provides an update of developments in debt restructurings by Paris Club creditors since July 1993. focusing mainly on reschedulings during 1995.77 During the period between July 1993 and July 1995, 32 rescheduling agreements were concluded, consolidating debt-service obligations amounting to about $39 billion; these involved 19 low-income countries, 5 lower middle-income countries, and 7 other middle-income countries78 (Tables A25 and A26), This brings the total number of Paris Club reschedulings since 1976 to 244, involving debt-service obligations amounting to $276 billion (Table A30).79

Overview of Recent Paris Club Restructurings

Developments over the past two years may be characterized as follows:

First, with the graduation of seven middle-income countries, the number of middle-income countries that continue to require Paris Club rescheduling declined further.80 Of the 30 middle-income countries that required Paris Club reschedulings in the past decade, 19 have now graduated. Moreover, a majority of the re-maining middle-income countries with agreements now in force or imminent are expected to graduate at the end of their current or prospective consolidation periods.

Second, creditors continued to adapt their rescheduling practices to the circumstances of individual countries, with a particular focus toward modifying rescheduling coverage and terms to take into account countries’ prospects for graduation. For example, rescheduling on London terms was agreed with Cameroon and Cote d’voire, although both countries had previously been considered lower middle-income countries. In contrast, reschedulings for Croatia, Ecuador, Kenya, the Philippines, Uganda, and Vietnam were designed as exit reschedulings, with relatively limited coverage and/or short repayment periods.

Third, the debt situation for most low-income rescheduling countries remains difficult despite repeated reschedulings over the past several years. Since 1989, only two low-income rescheduling countries (Uganda and Vietnam) have graduated from rescheduling, bringing the total number of low-income countries that have graduated to 4 out of a total of 35 low-income countries that have rescheduled since 1980; in addition, Cambodia and Haiti may graduate at the end of their current consolidation periods. In recognition of the heavy debt burden of this group of countries. Paris Club creditors adopted Naples terms in December 1994 (see Box 4) for low-income rescheduling countries, which increased the level of concessionary to 67 percent in NPV terms compared with 50 percent under London terms. Moreover, coverage under the concessional reschedulings for this group of countries has generally been comprehensive.

As under the previous reschedulings on London terms, agreements under Naples terms also feature a goodwill clause referring to a stock-of-debt operation after a period of three years of good performance under both IMF arrangements and the rescheduling agreement. The only low-income country to date to have received a stock-of-debt operation was Uganda, in February 1995 (under Naples terms). In addition, creditors continued with previous trends toward multi-year consolidations on the basis of multi-year’ and typically covering the full length of—IMF arrange-ments. Reflecting standard Paris Club practice, multi-year consolidations were tranched, with effectiveness of subsequent tranches linked to, among other items, approval by the IMF Board of annual arrangements under the ESAF, or annual reviews under EFF arrangements.

The current status of the 65 countries that have rescheduled since 1980 is shown in Table 4, distinguishing between countries that have graduated from the rescheduling process, those that have agreements in place, and those that do not have effective rescheduling agreements.81 The grouping into low-income, lower middle-income, and other middle-income countries reflects the terms these countries have obtained from Paris Club creditors.

Features of Naples Terms for Low-Income Rescheduling Countries

Naples terms (see Box 4 for a summary) were agreed by Paris Club creditors in December 1994. building on the menu of London terms agreed in 1991, but extending them significantly in several respects. First, the level of concessionality that is applied under Naples terms will result, for most low-income rescheduling countries, in a 67 percent NPV reduction, rather than the 50 percent NPV reduction under London terms. Second, in cases where debtor countries have established a good track record under both rescheduling agreements and IMF-supported programs, and there is sufficient confidence in the debtor’s ability to respect the agreement, Paris Club creditors will be prepared to implement a concessional rescheduling of the entire stock of eligible debt (a stock-of-debt operation); creditors agreed to such an operation for Uganda in February 1995 (see Box 16).

Paris Club creditors will continue to tailor the extent of debt relief under reschedulings to countries’ balance of payments needs by varying the extent of coverage of pre-cutoff date debt eligible for rescheduling.82 However, Naples terms provide more flexibility on the coverage of debt that can be rescheduled than in the past. In particular, debt previously rescheduled on concessional (either Toronto or London) terms is now subject, on a case-by-case basis, to further rescheduling to raise (or top up) the level of concessionality originally pro-vided to the new level of 67 percent (or 50 percent) under Naples terms.83 There is also scope for reprofil-ing nonconcessionally such debt previously treated under concessional terms.84

Table 23 summarizes the evolution of Paris Club rescheduling terms. For low-income countries, repayment terms with a 67 perccnl NPV reduction are summarized in Tables A22 through A24 and Charts 14 and 85Chart 14 shows the profiles of total payments under the various concessional options under Naples terms with 67/50 percent NPV reduction. Chart 15 compares the total annual payments under Naples, London, and Toronto terms and shows that cumulative payments under Naples terms are universally lower than under London or Toronto terms.

Box 16.Stock-of-Debt Operation: Uganda

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

Main Features of Recent Reschedulings

Low-Income Countries

For low-income countries, coverage of pre-cutoff date debt in recent rescheduling agreements was usually comprehensive and included principal and interest falling due during the consolidation period, and arrears (including late interest) on debt not previously rescheduled and on previous reschedulings on non-concessional terms.86 In countries with pressing fi-nancing needs and with previous concessional reschedulings on Toronto terms (the Central African Republic, Niger, and Senegal), the agreements under London terms covered maturities falling due under the previous agreements but without further concessions and with standard repayments terms (i.e., 10 years’ maturity and 5 years’ grace).

After the adoption of Naples terms, 11 low-income countries reached rescheduling agreements in the first seven months of 1995 (Table A26). These reschedulings provided for a 67 percent NPV reduction of amounts consolidated for all countries except Guinea, which received a flow rescheduling with a 50 percent NPV reduction of amounts consolidated. In line with previous trends in concessional reschedulings, Naples terms pro-vided for comprehensive coverage of pre-cutoff date debts—with the exception of Mauritania’s, which excluded all arrears and late interest. Typically, the agreements included principal and interest falling due during the consolidation period, and arrears (including late interest) on debts not previously rescheduled and previously rescheduled on nonconcessional terms. The coverage and other features of these agreements are described in more detail in Box 17; Box lSdescribes the treatment of debt previously rescheduled on London terms in the agreements with Mauritania and Nicaragua.

Table 23.Evolution of Paris Club Rescheduling Terms
Low Income Countries2
Naples terms-67 percent NPV debt reduction45 options
MiddleLower Middle-IncomeToronto termsLondon terms3DSR
Countries(Houston Terms)1DRDSRLMDRDSRCMILMDRflowsStocksCMILM
ImplementedSince Sept. 1990Oct.1988-June 1991Dec. 1991-Dee. 1994Since January 1995
Grace5-61upto 8188146-51666-3820
Repayment scheduleFlat/graduatedFlat/graduatedFlatFlatFlatGraduatedGraduatedGraduatedGraduatedGraduatedGraduatedGraduatedGraduatedGraduated
Interest rate7MarketMarketMarketReduced8MarketMarketReduced9Reduced9MarketMarketReduced10Reduced10Reduced10Market
Reduction in NPV--3320-3011-505050-676767-
Memorandum items
ODA credits
Grace5-6 10up to 10141414121212161616161620
Source:Paris Club

Chart 14.Total Annual Payments Under Naples Terms 1

(In percent of amounts consolidated)

1 Assumes a market interest rate of 8 percent.

Chart 15.Low-Income Rescheduling Countries:Payments Profile Under Naples, London, and Toronto Terms 1

(In percent of amounts consolidated)

Sources: Paris Club; and IMF staff estimates.

1 Assuming a market interest rate of 8 percent.

2 Equal distribution among the options. Based on actual distribution.

3 Distribution (in percent) of DR 40; DSR 45; CMI 10; LM 5. Based on actual distribution.

67 percent reduction in NPV terms. Distribution (in percent) of DR 45; DSR 45; CMI 10. The LM option is not included, given that any creditor choosing this option undertakes best efforts to change to a concessional option at a later date when feasible.

The total amount of debt service consolidated under Naples terms amounted to $2.7 billion, bringing the total amount consolidated under concessional London and Naples terms since 1991 to $10.8 billion compared with a total of $11.4 billion of debt-service obligations falling due (including arrears) on pre-cutoff date debt (Table A27). Therefore, taking into account some $0.5 billion in moratorium interest, debt-service payments due since 1991 on pre-cutoff date debt to Paris Club creditors were reduced to about $1.1 billion. In addition, payments of about $2 billion were due on post-cutoff date debt, some of which were deferred.

Middle-Income Countries

A notable feature in the reschedulings for middle-in-come countries has been the increasing use of graduated payment schedules (with a grace period of 2-3 years and maturity of about 15 years), which were initially featured in the 1992 agreements with Argentina and Brazil. Debtor countries favor these agreements because they avoid a jump in principal repayments, while creditor countries regard the short grace period as a good test of the debtor’s willingness to repay. Graduated payments schedules were featured in reschedulings for Algeria, Croatia, Gabon, Jordan, Kenya, the former Yugoslav Republic of Macedonia, and Russia—only Bulgaria obtained rescheduling on standard terms.

Agreements continued to be characterized by further differentiation on the basis of individual countries’ circumstances. In some cases, exit reschedulings were agreed with limited coverage and short consolidation periods. For example, the 1995 agreement for Croatia87 rescheduled arrears (excluding late interest) on pre-cutoff date debt, and principal payments falling due during the consolidation period on previously rescheduled debt, over 15 years with 3 years’ grace. Late interest on debt covered in the agreement was deferred, to be paid over 5 years starting in July 1996. The 1995 agreement with Algeria rescheduled principal payments on pre-cutoff date debt not previously rescheduled falling due through May 1998, and interest payments falling due through May 1996, over 15 years with 2½ years’ grace. In the case of the former Yugoslav Republic of Macedonia, 88 the 1995 agreement rescheduled arrears (excluding late interest) and current maturities falling due through June 1996 (in line with the stand-by arrangement) on pre-cutoff date debt over 15 years including 3 years’ grace. On an exceptional basis, reflecting that country’s extremely difficult short-term external position, the agreement deferred arrears on post-cutoff date debt (including late interest) as well as Luc interesl on pre-cutoff date arrears over 6 years, including 2 years’ grace. The coverage of debt service in the 1995 rescheduling agreement with Russia also continued to be very broad (see Box 19).

Box 17.Naples Terms Rescheduling Agreements: Coverage, Choice of Options, and Goodwill Clause

Rescheduling agreements under Naples terms generally covered principal and interest on pre-cutoff date debt not previously rescheduled and debt previously rescheduled on nonconcessional terms. The coverage of debt previously rescheduled on concessional terms, and of arrears, reflected the circumstances of the particular country.

For countries that had a previous rescheduling on Toronto terms, the 1995 reschedulings also covered debt service falling due during the consolidation period under those agreements (on Toronto terms debt), except for Guinea. Reflecting the increased level of concession-ality under Naples terms, in three cases (Chad, Guinea-Bissau, and Uganda), creditors agreed to top up to a 67 percent net present value (NPV) reduction the debt relief previously granted on Toronto terms debt for maturities falling due during the consolidation period, and arrears (including late interest). In some cases, the topping up to a 67 percent NPV reduction was limited to current maturities and applied only to a part of the consolidation period (Mauritania), or applied only to arrears, including late interest (Togo). For the other countries with current maturities falling due on Toronto terms debt (Bolivia, Senegal, and Togo), the obligations were reprofiled nonconcessionally.

For countries that had a previous rescheduling on London terms, in a majority of cases (Bolivia, Guinea. Senegal, Togo, and Uganda) the agreements excluded arrears and maturities falling due under those agreements during the consolidation period. However, where the balance Of payments position was exceptionally weak (Mauritania and Nicaragua), the agreements provided for a nonconcessional deferral of such maturities (see Box 18), and, in the case of Nicaragua, for a nonconcessional deferral of moratorium interest.

Arrears on post-cutoff date debt were deferred in the cases of Guinea-Bissau and Senegal. In recognition of Guinea-Bissau’s difficult financial position, the agreement provides for exceptional treatment by deferring nonconcessionally arrears (including late interest) on post-cutoff date debt, to be paid over 10 years with a graduated payments schedule; however, this was not to set a precedent. For Senegal, specified post-cutoff date arrears, payable in March 1995 under the 1994 agreement (London terms), were deferred nonconcessionally with payments over 3 years and within the consolidation period; these would not be subject to any further reorganization.

In nine of the 11 reschedulings under Naples terms, all creditors chose concessional options. In the other two agreements, two creditors, the United States (for Bolivia and Nicaragua), and Italy (for Nicaragua), chose the non-concessional long maturities option. For Bolivia, the United States was unable to choose a concessional option owing to lack of the necessary budgetary appropriations (see below), while, in the case of Nicaragua, the United States chose this option because of insufficient progress on the issue of property expropriation.1 Italy joined the United States in choosing the long maturities option in the case of Nicaragua.

Most agreements featured a goodwill clause stating that creditors agreed in principle to consider the matter of a debtor country’s stock of debt three years following the signature of the Agreed Minute (for Chad, Guinea-Bissau, and Togo) or earlier, at the end of the consolidation period (for Mauritania, Nicaragua, and Senegal), provided the debtor country implements the agreement in full and continues to have an appropriate arrangement with the IMF. Three rescheduling agreements did not feature a goodwill clause (Cambodia under the terms-of-reference agreement, and Guinea and Haiti). In the case of Haiti, this was because the agreement rescheduled two thirds of Haiti’s stock of debt to Paris Club creditors with a 67 percent NPV reduction, and all the remaining debt was concessional official development assistance. Guinea’s clause under its 1992 agreement, which envisaged a possible debt stock operation in November 1995, remains valid, although creditors will wish to await the end of the current consolidation period (through the end of 1995) before considering a stock-of-debt operation. In the case of Bolivia, creditors agreed to consider such a stock-of-debt operation after September 1995, provided that a consensus could be found to choose concessional options.

1 U.S. legislation precludes debt reduction for countries (i) failing to make adequate efforts to deal with property expropriation; (ii) with egregious human rights violations; (iii) not cooperating on efforts to limit narcotics trade; (iv) supporting terrorism; and (v) with excessive amounts of military spending.

Box 18.Mauritania and Nicaragua: Treatment of Debt Previously Rescheduled on London Terms

For these two countries, the rescheduling agree-ments provided for a nonconcessional deferral of ma-turities falling due during the consolidation period on London terms debt, but excluded arrears and late interest. For Mauritania, the agreement covered 24 months for maturities on London (and Toronto) terms debt (of a consolidation period of 36 months). For Nicaragua it covered 17 months for most maturities on London terms debt compared with 27 months for other maturities, although some London terms debts were excluded.

The rescheduling of such maturities for Mauritania featured a graduated payments schedule over 7 years with payments beginning 6 months after the end of the consolidation period; also, the amounts consolidated will be excluded from future reschedulings. The rescheduling for Nicaragua featured equal payments over 4 years with payments beginning 3 months after the end of the consolidation period.

The amount consolidated for middle-income countries (excluding Russia) since December 1994 was $8.2 billion, bringing the total amount consolidated by Paris Club creditors since 1991 to $31.4 billion of pre-cutoff date debt compared with $39.5 billion of amounts falling due (Table A29). Thus total payments due from these countries were reduced to $ 11 billion (including $3 billion of moratorium interest). In addition. $7.4 billion on post-cutoff date debt was due.

There were no reschedulings for lower middle-income countries between August 1994 and July 1995. The total debt service consolidated on lower middle-income (Houston) terms for the 16 countries with reschedulings since 1991 remained at $20.2 billion of $24.6 billion of debt-service obligations falling due (including arrears; Table A28). Thus, after taking into account moratorium interest payments of $1.5 billion, debt service due on pre-cutoff date debt was reduced to $6 billion. Additionally, $5.7 billion on post-cutoff date debt was due.

Debt Conversions Under Paris Club Provisions

For the low-income and lower middle-income countries, Agreed Minutes typically include a provision for debt swaps. The amount of commercial debt that can be converted in the framework of debt-for-nalure, debt-for-aid. debt-for-equily, or other local-currency-debt swaps is limited to the greater of $10-20 million per creditor (to be decided on a case-by-case basis) or 10 percent of consolidated commercial credits. For ODA loans, 100 percent of ODA and direct government loans could be included in such operations. All of the rescheduling agreements under Naples terms provided for $20 million and 10 percent limits (except for the agreements with Chad, Mauritania, and Guinea, which provided for $10 million and 10 percent limits).

On the basis of data available as at the end of 1994, for lower middle-income countries,89 total debt swapped under these provisions amounted to $ 1.5 billion, of which roughly three quarters was accounted for by Egypt. Most of the debt ($1.2 billion) was swapped in the framework of debt-for-equity or debt-for-local-currency swaps, and the remaining $0.4 billion, mostly under commercial credits, was swapped for development purposes.

For the low-income countries,90 total debt swapped amounted to $0.7 billion, of which about 40 percent was accounted for by Cote dTvoire. In contrast to the lower middle-income countries, almost all the debt swapped for the low-income countries was in the framework of debt-for-developmenl transactions.

Thus far, overall debt swapped for all countries amounted to $2.2 billion, of which three quarters was accounted for by two creditor countries, France (about $1 billion) and Switzerland (about $0.7 billion).91 The amount swapped under the ODA provisions was $0.5 billion, and under the commercial credits provision $1.8 billion.

Outside a formal debt swap arrangement, France canceled ODA debt of 14 countries in the CFA franc zone in January 1994, following the devaluation of the CFA franc. All arrears on ODA debt obligations and half of future maturities on such ODA debts were forgiven. The total debt canceled (including interest arrears) amounted to around FF 18 billion (approximately $3 billion). Savings on future interest paymerits on the canceled debt were estimated at FF 7.3 billion ($1.2 billion).

Box 19.Debt Rescheduling Agreement with the Russian Federation in 1995

On June 3, 1995, official bilateral creditors meeting as the Group of Participating Creditor Countries and Russia reached a third rescheduling agreement covering 100 percent of principal and interest falling due from January 1, 1995 to December 31, 1995 on non-previously rescheduled pre-cutoff date debt. The total amount consolidated was about $6.4 billion. The repayments of the consolidated amounts were to be in 26 semiannual graduated payments with a maturity of 15 years including a 3-year grace period.

In light of the exceptional circumstances of this case, the agreement also provided for a comprehensive deferral of amounts falling due during the consolidation period as follows: (i) 100 percent of principal and interest (excluding late interest) due on debts contracted in 1991, which are to be paid in 16 semiannual graduated payments starting on October 31, 1998; (ii) 100 percent of principal (excluding late interest) due as a result of the consolidation agreements concluded on debts originally short term and due at the end of 1992. pursuant to the April 1993 agreement, and not paid, were deferred and are to be paid in 10 equal semiannual installments starting on October 31, 1997; and (iii) 100 percent of principal (excluding late interest) due from the consolidation agreements on debt contracted in 1991 and due as at the end of 1992, pursuant to the April 1993 agreement, and not paid, were deferred and are to be paid in 16 semiannual, graduated installments starting on October 31, 1997.

In addition, it was agreed that 40 percent of interest falling due during the consolidation period on specific debts pursuant to the April 1993 agreement, and 33.33 percent of interest falling due between April I, 1995 and December 31, 1995 as a result of the consolidation agreement pursuant to the June 1994 agreement, with respect to debt contracted prior to 1991 and in 1991 (including debt that was originally short term), were deferred and are to be paid in 10 equal semiannual payments starting October 31, 1998. All other payments due and not covered by the agreement were to be paid on the due dates, while arrears outstanding as at the date of the agreement were to be paid as soon as possible and not later than July 15, 1995.

Creditors agreed to begin, in the fall of 1995. negotiations on a comprehensive rescheduling of debts owed by Russia provided (i) Russia continues to implement the stand-by arrangement approved on April 11, 1995; (ii) all payments due to creditors are made; and (iii) substantial progress is made in concluding the bilateral agreements implementing the current agreement. Entry into force of a comprehensive agreement would be contingent on approval by the IMF of an extended financing facility (EFF) arrangement, or a stand-by arrangement supporting a medium-term program.

Recent Experience with Debt Restructurings Involving Official Bilateral Creditors Not Participating in the Paris Club

Countries that request reschedulings from Paris Club creditors in support of their IMF arrangements typically also have debt-service obligations to official bilateral creditors that do not participate in Paris Club reschedulings.92 Paris Club creditors require as a condition for reschedulings that debtor countries seek debt relief on comparable terms from other creditors. The IMF also has a direct concern in promoting agreements on these obligations, because of its interest in fostering orderly relations between debtor countries and their creditors and because the financing of IMF-supported programs often requires appropriate relief on obligations from all official bilateral creditors.

Reflecting the absence of an established institutional forum for negotiations, individual creditor countries not participating in the Paris Club have developed different approaches that have been adapted to the individual circumstances of debtors. In most cases, creditors have agreed to a rescheduling of obligations, while in some other cases debt buybacks involving substantial discounts were effected. Bilateral debt-restructuring agreements concluded recently are listed in Table A31.

In mid-1995 Algeria restructured $0.5 billion debt with Saudi Arabia on terms comparable to the July 1995 Paris Club agreement. In June 1994 Angola restructured debt with Portugal on nonconcessional terms, and in late 1993 agreed with Spain to repay in kind $135 million over less than three years. In March 1994 Bolivia renegotiated a 1989 agreement with Brazil, entailing a substantial debt reduction on $69 million in arrears and debt; payments will be effected in U.S. Treasury bonds. The Dominican Republic bought back debt to Brazil in September 1993 ($12 million) and to Argentina in June 1994 ($24 million) at discounts of 70 and 50 percent, respectively. In 1993 Egypt bought back debt to China ($209 million) at a 50 percent discount. El Salvador bought back debt to Venezuela ($29 million) in January 1993, using the creditor’s commercial debt, and to Argentina ($24 million) in September 1993, at discounts of 40 and 60 percent, respectively. In January 1995 Haiti rescheduled $5 million in arrears to Venezuela on non-concessional terms. In June 1994 Honduras bought back at a 70 percent discount $35 million in arrears to Argentina, and in December 1994 rescheduled with Costa Rica $27 million on nonconcessional terms. Jamaica rescheduled arrears and debt on nonconcessional terms ($44 million) with Mexico in June 1993, and with Venezuela ($22 million) in July 1993. In early 1994 Jordan rescheduled debt with Taiwan Province of China ($2.5 million; on lower middle-income countries terms as in Jordan’s 1992 Paris Club Agreement), and with Switzerland (buyback of S24 million at a discount, and Ihe financing of environmental projects). In July 1992 Mali secured a five-year moratorium on its debt-service obligations through the end of 1996 to China (CFAF 45 billion). In August 1993 Nicaragua bought back debt to Argentina, ($10 million) at an 88 percent discount. Poland agreed with Libya in 1993 to repay in kind $200 million over four years. In mid-1994 Sierra Leone rescheduled concessionally a $41 million debtor balance in a discontinued bilateral trading agreement with China. Uganda rescheduled debt with China ($32 million) in February 1993, the bulk of it on nonconcessional terms, and with India ($54 million) in 1992 on nonconcessional terms.

A number of countries rescheduled their debt to Russia. Algeria’s protocol of early 1994 covered about half of its outstanding debt to Russia as of the end of 1993 (Rub I billion) and provided for payments partly in kind. Egypt’s agreement of late 1994 covered three different types of debt totaling about Rub 1.7 billion to be repaid by 2010; as payments fall due, an outstanding Egyptian creditor balance in a defunct clearing arrangement will be drawn down. A 1994 agreement with Mongolia deferred principal repayments and interest charges.

Further progress has been made in settling outstanding bilateral balances among countries of the former Council for Mutual Economic Assistance (CMEA). Late in 1993. Albania restructured debt owed to the former German Democratic Republic (DM 13 million) with Germany. In 1994, Poland agreed with Germany to restructure a debtor balance to the former German Democratic Republic. While negotiations on a formal agreement continue, Vietnam and Russia agreed in 1994 on an informal arrangement, where Vietnam makes partial payment in kind on the amounts falling due. In late 1993/early 1994, Russia rescheduled concessionally an outstanding debtor balance for the Lao People’s Democratic Republic that is to effect yearly commodity exports through 2000, when the agreement will be reviewed. During 1993, the Slovak Republic and Russia agreed to settle a portion of an outstanding creditor balance through Russian exports of military hardware ($170 million). Negotiations continue on the remaining balance.93 In February 1995 Poland and Russia agreed to the mutual cancellation of outstanding intergovernmental loans and commercial credits; Russia is to settle a small remaining creditor balance in cash during 1995. In mid-1995. Hungary agreed to the settlement of the remaining balances ($1.7 billion) by Russia in kind (largely military hardware) rather than in cash. Mongolia agreed with Hungary in January 1994 to restructure short-term debt and an outstanding debtor balance in a clearing account.

A new issue has arisen in the last year or two. as some countries of the former Soviet Unionrequired debt relief on their large debts to other countries of the former Soviet Union. Many of these countries have adopted IMF-supported adjustment programs that critically rely for financing on debt relief from official creditors in the former Soviet Union. The multilateral framework for debt renegotiation provided by the Paris Club was not an option for these countries, since their eligible debt to Paris Club creditors, if any, was limited. Negotiations with the creditor countries were conducted on a bilateral basis. Early in 1995. Ukraine concluded bilateral debt-rescheduling agreements with Russia ($2.6 billion) and Turkmenistan ($1 billion). The agreement with Russia, covering 1995 maturities and arrears at the end of 1994, provides for the nonconcessional rescheduling of $2.1 billion, and debt/equity swaps and payments in kind for the remainder.

A description of developments prior to the end of June 1993, and the general Paris Club framework (appendix I), including a glossary of terms (appendix III), can be found in Official Financing for Developing Countries, World Economic and Financial Surveys (Washington: International Monetary Fund, April 1994).

There were two rescheduling agreements with Russia during this period.

The starting date is somewhat arbitrary, since multilateral official debt reschedulings through the Paris Club date back to 1956.

While only 5 countries managed to graduate from Paris Club reschedulings in the 1980s, 18 countries (all lower middle-income countries except for Uganda and Vietnam, 2 low-income rescheduling countries) have already graduated in the 1990s.

The 65 countries include the former Socialist Federal Republic of Yugoslavia, Croatia, and the former Yugoslav Republic of Macedonia.

As under London terms, post-cutoff date debt is not eligible for rescheduling and movement of cutoff dates is rejected.

For stock operations, all pre-cutoff date ODA debt is rescheduled, whether previously rescheduled or not.

Under reprofiling, the debt concerned would be rescheduled nonconcessionally (with no debt reduction) over 23 years with 6 years’ grace. In addition, under a stock-of-debt operation, interest in the early years is usually higher than under a flow rescheduling (under which interest can be rescheduled); to deal with this, on a case-by-case basis, interest in the early years under stock operations can be rescheduled over 23 years.

The repayment terms under Naples terms involving a 50 percent NPV reduction are the same as under London terms, except for the debt-service reduction under a stock operation that involves a grace period of three years under Naples terms compared with no grace period for this option under London terms.

For the first time, Australia and the United States chose concessional rescheduling options.

This included both allocated debt (owed or guaranteed by entities on Croatian territory) and unallocated debt (debts not attributable to a successor state of the former Yugoslavia).

Paris Club creditors reached agreement with the former Yugoslav Republic of Macedonia on the terms and conditions for the rescheduling agreement, but no Agreed Minute was signed at the time. The agreement covered both allocated debt and nonallocated debt.

Includes the Congo, Egypt, Jordan, Nigeria, Peru, the Philippines, and Poland.

These include Bolivia, Cameroon, Cote d’lvoire, Equatorial Guinea, Guinea, Honduras, Mali, Mozambique, Nicaragua, Senegal, Tanzania, Vietnam, and Zambia.

Creditor countries that have participated in the debt-swap provisions include Belgium, Finland, France, Germany, Norway, Sweden, Switzerland, and the United Kingdom.

For developments prior to 1994. anil a furihcr discussion of the Paris Cluh comparability of treatment policy, see Official Fiiumc-ing for Developing Countries, World Economic and Financial Surveys (Washington: International Monetary Fund. April 1994).

According to the Slovak authorities, this outstanding balance was $1.5 billion.

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