Chapter

Appendix

Author(s):
International Monetary Fund
Published Date:
January 1986
Share
  • ShareShare
Show Summary Details

Glossary of Selected Terms in Official Multilateral Debt Reschedulings

Agreed Minute

—The terms agreed upon in the multilateral rescheduling meeting are embodied in an Agreed Minute. The Minute normally specifies the coverage of debt service payments to be consolidated, the cutoff date, the consolidation period, the proportion of payments to be rescheduled, the provisions regarding the downpayment, and the repayment schedule for both the rescheduled and deferred debt. Delegates to the meeting undertake to recommend to their governments the incorporation of these terms in the bilateral agreements that implement the rescheduling.

Arrears

—unpaid amounts that fell due before the beginning of the consolidation period.

Bilateral agreements

—Agreements reached bilaterally between the debtor country and agencies in each of the participating creditor countries establishing the legal basis of the debt restructuring as set forth in the Agreed Minute. Bilateral Agreements specify the interest rate on amounts deferred or rescheduled (moratorium interest), which is agreed bilaterally between the debtor and each creditor.

Bilateral deadline

—the date by which all of the bilateral agreements must be concluded. The period for concluding bilateral agreements is now generally six to seven months from the date of the Agreed Minute.

Conditional further rescheduling

—See below, “multi-year rescheduling agreement.”

Consolidation period

—the period in which debt service payments to be consolidated or rescheduled under the terms applicable to current maturities have fallen or will fall due. The beginning of the consolidation period may precede, coincide with, or come after the date of the Agreed Minute.

Current maturities

—principal and interest payments falling due within the consolidation period.

Cutoff date

—the date before which loans must have been contracted in order for their debt service to be covered by the rescheduling. Decisions about whether to include in an agreement debt service due under previous multilateral official reschedulings are made independently of whether those previous agreements were before or after the cutoff date.

Cutoff interval

—the number of months between the cutoff date and the beginning of the consolidation period.

“De minimis” clause

—the provision whereby creditor countries whose claims that would be covered by the rescheduling agreement total to less than a specified amount are excluded from the rescheduling agreement. In the past, the de minimis amount was set at around SDR 1 million, but since 1983 about one half of the agreements have provided for limits of SDR 500,000 or SDR 250,000. In the case of the two MYRAs granted as of June 1986 the de minimis amount for the three-year consolidation period was set at SDR 1.5 million. The debtor is expected to pay all claims excluded by this clause. Overdue claims are to be paid as soon as possible, and in any case by a date specified in the Agreed Minute.

Deferred payments

—In this paper, deferred payments refer to debt service obligations that are not rescheduled under the terms of the Agreed Minute but whose payment is postponed until after the end of the consolidation period.

Downpayment

—In this paper, downpayment refers to payments falling due within the consolidation period on debts covered by the agreement.

Effectively rescheduled portion

—the proportion of total payments covered by the rescheduling agreement that are rescheduled or otherwise deferred until after the end of the consolidation period.

Goodwill clause

—refers to creditors’ willingness as expressed in the Agreed Minute to meet to consider further debt relief in the future, subject to fulfillment by the debtor country of certain specified conditions.

Grace period and maturity

—Paris Club Agreed Minutes specify the first and last payment dates, but do not refer to the length of the grace period or to the maturity. In this paper, grace periods and maturity on rescheduled current maturities are counted from the end of the consolidation period. In the case of the rescheduling of arrears and late interest on arrears, they are measured from the beginning of the consolidation period.

Improved goodwill clause

—refers to a provision in the Agreed Minute whereby creditors agree to meet with the debtor country to consider a further rescheduling covering a specified future consolidation period, provided certain conditions are met. It represents a stronger degree of commitment on the part of creditors to a future rescheduling than the standard goodwill clause since it specifies at the outset some of the rescheduling terms and the exact length of the future consolidation period. As in the case of official MYRAs, a rescheduling agreement with an improved goodwill clause covers an extended consolidation period through the implementation of successive shorter consolidations (serial reschedulings). However, this type of agreement differs from a MYRA in that a further meeting is required to approve the subsequent consolidation period. Some of the rescheduling terms for the second stage are not determined at the outset and must be agreed between creditors and the debtor at the time of the second meeting. This contrasts with the semi-automatic implementation provided for in the case of official MYRAs (see below).

Initiative clause
—the standard undertaking in the Agreed Minute that the debtor country will seek to restructure debts owed to other creditors on terms comparable to those outlined in the Agreed Minute. This clause appears as one of the general recommendations and reads:

In order to secure comparable treatment of public and private external creditors on their debts, the Delegation of [debtor country] stated that their Government will seek to secure from external creditors, including banks and suppliers, rescheduling or refinancing arrangements on terms comparable to those set forth in this Agreed Minute for credits of comparable maturity, making sure to avoid inequity between different categories of creditors.

Late interest

—interest accrued on principal and interest in arrears.

Maturity

—grace period plus repayment period.

Moratorium interest

—see “bilateral agreements” above.

Most-favored-nation clause

—the standard undertaking in the Agreed Minute whereby the debtor country agrees not to accord to creditor countries that did not participate in the multilateral agreement repayment terms more favorable than those accorded to the participating creditor countries for the consolidation of debts of comparable term.

Multiyear rescheduling agreement (MYRA)

—MYRAs granted by official creditors cover consolidation periods of two or more years through the implementation of a succession of shorter consolidations (serial reschedulings) which come into effect automatically after certain conditions are satisfied. To this effect, the Agreed Minute includes a “conditional further rescheduling” provision which sets forth the terms of the rescheduling for payments that fall due in specified subsequent future periods, and the conditions for such a rescheduling to become effective without a further Paris Club meeting. The implementation of each stage requires only a decision by creditors determining that the relevant conditions have been met. The objective of a MYRA is to help rebuild normal debtor-creditor relations in cases of countries that have recorded significant domestic and external adjustment. Such agreements have, therefore, tapered the amount of debt relief over the sequential stages of the MYRA and excluded interest from the rescheduling. They have also specified monitoring provisions for the part of the consolidation where it was not necessarily foreseen that a Fund arrangement would be in place.

Serial rescheduling

—see “multiyear rescheduling agreement” and “improved goodwill clause” above.

Special account

—an account established under some Agreed Minutes by the debtor country with the central bank of one of the participating creditor countries into which monthly deposits of an agreed amount are made. The total amount to be deposited usually approximates the amounts estimated to be payable to all participating creditors during the consolidation period; the debtor country draws on the account as bilateral agreements are signed and specific payments under these agreements became due.

World Economic and Financial Surveys
April 1986World Economic Outlook: A Survey by the Staff of the International Monetary Fund.
May 1986Primary Commodities: Market Developments and Outlook, by the Commodities Division of the Research Department.
July 1986Staff Studies for the World Economic Outlook, by the Research Department.
July 1986Export Credits: Developments and Prospects, by Eduard Brau, K. Burke Dillon, Chanpen Puckahtikom, and Miranda Xafa.
October 1986World Economic Outlook: Revised Projections, by the Staff of the International Monetary Fund.
December 1986International Capital Markets: Developments and Prospects, by Maxwell Watson, Russell Kincaid, Caroline Atkinson, Eliot Kalter, and David Folkerts-Landau.
February 1987Recent Experience with Multilateral Official Debt Rescheduling, by K. Burke Dillon and Gumersindo Oliveros.

    Other Resources Citing This Publication