Asian Development Fund.

African Development Bank.

African Development Fund.

Paris Club document detailing the terms for a rescheduling between creditors and the debtor. It specifies the coverage of debt-service payments (types of debt treated), the cutoff date, the consolidation period, the proportion of payments to be rescheduled, the provisions regarding the down payment (if any), and the repayment schedules for rescheduled and deferred debt. Creditor governments commit to incorporate these terms in the bilateral agreements negotiated with the debtor government that implements the Agreed Minute. Paris Club creditors will agree to reschedulings only with countries that have an IMF upper credit tranche arrangement (Stand-By Arrangement or EFF), a SAF or an ESAF arrangement, or a Rights Accumulation Program.

Unpaid or overdue payments. In the context of export credits, arrears are overdue payments by borrowers that have not yet resulted in claims on export credit agencies.

Asian Development Bank.

Bank for International Settlements.

International Union of Credit and Investment Insurers. An association founded in 1934 of export credit insurance agencies, all participating as insurers and not as representatives of their governments. The main purposes of the Berne Union are to work for sound principles of export credit insurance and maintenance of discipline in the terms of credit in international trade. To this end, members exchange information and furnish the Union with information on their activities, consult with each other on a continuing basis, and cooperate closely.

Agreements reached bilaterally between the debtor country and agencies in each of the creditor countries participating in a Paris Club rescheduling. These agreements put into effect the debt restructuring set forth in the Agreed Minute and are legally the equivalent of new loan agreements.

The creditors are governments. Their claims are loans extended, insured, or guaranteed by governments or official agencies, such as export credit agencies. Certain official creditors participate in debt reschedulings under the aegis of the Paris Club.

In the context of Paris Club reschedulings, the date by which all bilateral agreements must be concluded. It is set in the Agreed Minute and is typically about six months later, but can be extended upon request.

Loans extended by a bilateral creditor.

Approach adopted in the late 1980s to restructure debt to commercial banks. It emphasizes voluntary market-based operations to reduce debt and debt service. The main feature of these operations is the menu of options offered to creditors, which consists of some combination of a buyback at a significant discount, and the issuance of “Brady bonds” by the debtor country in exchange for banks’ claims. Such operations complement countries’ efforts to restore external viability through the adoption of medium-term structural adjustment programs supported by the IMF and other multilateral and official bilateral creditors.

The purchase by a debtor of its own debt, usually at a substantial discount. The debtor reduces its obligations while the creditor receives a once-and-for-all payment. Although in apparent contravention of standard commercial bank loan agreements, some debtors have bought back their own debt on the secondary market.

A financial arrangement in which a bank or financial institution, or an export credit agency in the exporting country, extends a loan directly to a foreign buyer or to a bank in the importing country to finance the purchase of goods and services from the exporting country.

Central American Bank for Economic Integration.

Corporación Andina de Fomento.

An agreed reduction in the undisbursed balance of a loan commitment.

Scheduled interest payments that are converted, through an agreement made with the creditor, into disbursed and outstanding debt. Rescheduling agreements frequently provide for the capitalization of some percentage of interest due during the consolidation period.

Option under concessional Paris Club reschedulings where creditors effect the required net present value (NPV) debt relief through a reduction in the applicable interest rate (but a lower reduction than in the debt-service-reduction option) and with a partial capitalization of moratorium interest. Creditors choose this option only rarely. (See concessional rescheduling.)

Payments made to exporters or banks, after the claims-waiting period, by an export credit agency on insured or guaranteed loans when the original borrower or borrowing-country guarantor fails to pay. This is recorded by the agencies as an unrecovered claim.

The period that exporters or banks must wait after arrears occur before the export credit agency will pay on the corresponding claim.

The joint or parallel financing of programs or projects through loans or grants to developing countries provided by commercial banks, export credit agencies, other official institutions in association with other agencies or banks, or the World Bank and other multilateral financial institutions.

In the context of the Paris Club, loans originally extended on terms that do not qualify as official development assistance credits. These are typically export credits on market terms or have a relatively small grant element.

A set of currency-specific interest rates for major OECD countries. These rates are determined monthly on the basis of the secondary market yield on government bonds with a residual maturity of five years.

In the context of export credits, the risk of nonpayment by a nonsovereign or private sector buyer or borrower in his or her home currency arising from default, insolvency, and/or a failure to take up goods that have been shipped according to the supply contract (contrasted with transfer risk arising from an inability to convert local currency into the currency in which the debt is denominated or with broader political risk).

In the context of export credits, a firm obligation by an export credit agency to lend, guarantee, or insure resources of a specific amount under specific financial terms and conditions and for specific purposes for the benefit of a specific importer, either globally or to entities in a specific country, expressed in an agreement or equivalent contract.

In the context of data reported by export credit agencies, the total amount of loans excluding amounts that are in arrears or on which claims have been paid. Usually includes principal and contractual interest payable by the importing country on disbursed and undisbursed credits, and sometimes includes not only liabilities of the agency but also uninsured parts of the loan. Therefore, “commitments” are almost always larger than the face value of the loan and sometimes larger than the agency’s total exposure.

This is the charge made for holding available the undisbursed balance of a loan commitment. Typically, it is a fixed-rate charge (e.g., 1.5 percent a year) calculated on the basis of the undisbursed balance.

An understanding in a debt-restructuring agreement with the Paris Club creditors that the debtor will secure at least equivalent debt relief from other creditors.

In the context of the HIPC Initiative, a point at which the country concerned completes a second (generally) three-year track record of good performance under adjustment programs supported by the IMF and the World Bank after reaching the decision point (see, below, decision point). Additional measures committed at the decision point will be implemented to assist the country to reach a sustainable level of debt at that time.

See grant element.

Rescheduling of debt with partial debt reduction. In the context of the Paris Club, concessional rescheduling terms have been granted to low-income countries since October 1988 with a reduction in the net present value (NPV) of eligible debt of up to one-third (Toronto terms); since December 1991, with an NPV reduction of up to one-half (London terms or “enhanced concessions” or “enhanced Toronto” terms); and, since January 1995, with an NPV reduction of up to two-thirds (Naples terms). In the context of the HIPC Initiative, creditors agreed in November 1996 to increase the NPV reduction to up to 80 percent (Lyon terms). Such reschedulings can be in the form of flow reschedulings or stock-of-debt operations. While the terms (grace period and maturity) are standard, creditors can choose from a menu of options to implement the debt relief. For full details, see Section V, Table 15.

See OECD Consensus.

The debt-service payments and arrears, or debt stock, rescheduled under a Paris Club rescheduling agreement.

In Paris Club rescheduling agreements, the period in which debt-service payments to be rescheduled (the “current maturities consolidated”) 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. The end of the consolidation period is generally the end of the month in which the IMF arrangement expires, on the basis of which the rescheduling takes place.

Provision of export credit guarantee or insurance against risks of payment delays or nonpayments relating to export transactions. Cover is usually, though not always, provided for both commercial risk and political risk. In most cases, cover is not provided for the full value of future debt-service payments; the percentage of cover is typically between 90 percent and 95 percent. (See also quantitative limits.)

In the context of rescheduling agreements, the debt service or arrears rescheduled. Comprehensive coverage implies the inclusion of most or all eligible debt service and arrears.

Commitment by an export credit agency to reimburse a lender if the borrower fails to repay a loan. The lender pays a guarantee fee. While guarantees could be unconditional, they usually have conditions attached to them, so that in practice there is little distinction between credits that are guaranteed and credits that are subject to insurance.

The main business of most export credit agencies is insurance of finance provided by exporters or commercial creditors (although some major agencies lend on their own account). Insurance policies provide for the export credit agency to reimburse the lender for losses up to a certain percentage of the credit covered and under certain conditions. Lenders or exporters pay a premium to the export credit agency. Insurance policies typically protect the lender against political or transfer risks in the borrowing country that prevent the remittance of debt-service payments.

In the context of rescheduling agreements, principal and interest payments falling due in the consolidation period.

The date (established at the time of a country’s first Paris Club rescheduling) before which loans must have been contracted in order for their debt service to be eligible for rescheduling. New loans extended after the cutoff date are protected from future rescheduling (subordination strategy). In exceptional cases, arrears on post-cutoff date debt can be deferred over short periods of time in rescheduling agreements.

Minor creditors that are exempted from debt restructuring to simplify implementation of the Paris Club rescheduling agreements. Their claims are payable in full as they fall due. An exposure limit defining a minor creditor is specified in each Agreed Minute, typically ranging from SDR 250,000 to SDR 1 million of consolidated debt.

Debt-restructuring agreements typically between sovereign states and consortia of commercial bank creditors involving a combination of buyback and exchange of eligible commercial debt for financial instruments at a substantial discount (simple cash buyback) or for new bonds featuring a net present value reduction. In some instances, the principal portion of new financial instruments is fully collateralized with U.S. treasury zero-coupon bonds, while interest obligations are also partially secured. DDSR operations are characterized by a “menu approach,” allowing individual creditors to select from among several DDSR options. Under the Brady plan of March 1989, some of these arrangements have been supported by loans from official creditors.

An arrangement that results in the exchange of debt claims, usually at a discount, for equity in an enterprise. An investor purchases title to a foreign-currency-denominated debt in a secondary market at a substantial discount. Under the debt-equity swap program, the debtor country government will exchange the debt for local currency at face value (with the government normally retaining some funds as a means of capturing a portion of the secondary market discount). The investor will then carry out an approved equity investment project. The difference between the face value and the market value of the debt provides an incentive to the investor. The debtor country government, for its part, must be prepared to spend the financial resources in domestic currency to retire debt.

Financing part of a development project through the exchange of a foreign-currency-denominated debt for local currency, typically at a substantial discount. The process normally involves a foreign nongovernmental organization (NGO) that purchases the debt from the original creditor at a substantial discount using its own foreign currency resources, and then resells it to the debtor country government for the local currency equivalent (resulting in a further discount). The NGO in turn spends the money on a development project, previously agreed upon with the debtor country government.

Similar to a debt-for-development swap, except that the funds are used for projects that improve the environment.

The extinction of a debt, in whole or in part, by agreement between debtor and creditor. Debt reduction in the context of concessional reschedulings from the Paris Club is applied to the net present value of eligible debt.

Option under concessional Paris Club reschedulings where creditors effect the required debt relief in net present value terms through a reduction of the principal of the consolidated amount. A commercial interest rate and standard repayment terms apply to the remaining amounts. (See concessional reschedulings,) For precise terms, see Section V, Table 15.

Procedure by which overdue payments or future debt-service obligations on an officially supported export credit are paid off using a new “refinancing” loan. The refinancing loan can be extended by the export credit agency, by a governmental institution, or by a commercial bank (with the guarantee of the export credit agency).

See rescheduling.

Any action by a creditor that alters the terms established for repayment of debt in a manner that provides for smaller near-term debt-service obligations (debt relief)- This includes rescheduling, refinancing, operations to reduce debt and debt service, buybacks, and forgiveness.

A key indicator of a country’s debt burden. Scheduled debt service (interest and principal payments due) during a year, expressed as a percentage of exports (typically of goods and nonfactor services) for that year.

Option under concessional Paris Club reschedulings where creditors effect the required debt relief in net present value terms through a reduction in the applicable interest rate. (See concessional rescheduling.) For precise terms, see Section V, Table 15.

As defined in the context of the HIPC Initiative, the position of a country when (1) the net present value (NPV) of the ratio of (public and publicly guaranteed) debt to exports and (2) the ratio of debt service to exports are below certain country-specific target levels within ranges of 200-250 percent and 20-25 percent, respectively. The specific sustainability targets in the above ranges are set for each country in light of the country-specific vulnerability factors, such as the concentration and variability of exports, and with particular attention to the fiscal burden of external debt service. And, (3) for highly open economies (indicated by an exports-to-GDP ratio of at least 40 percent) making a strong fiscal effort (expressed by a fiscal revenue-to-GDP ratio of at least 20 percent), the country-specific target for the NPV of the ratio of debt to exports is selected at a level consistent with meeting an NPV of a ratio of debt to revenue of 280 percent.

A study of a country’s long-term debt situation jointly undertaken by the staffs of the IMF and the World Bank and the country concerned, in consultation with creditors. A country’s eligibility for support under the HIPC Initiative is determined on the basis of such an analysis.

Statistical reporting system maintained by the World Bank to monitor the debt of developing countries on the basis of reports from debtor countries. Basis for the annual World Bank report, Global Development Finance (formerly, World Debt Tables).

In the context of the HIPC Initiative, the point at which a country’s eligibility for assistance under the HIPC Initiative is determined on the basis of the debt sustainability analysis. In order to reach a decision point, a country needs to establish a strong track record in the context of a three-year adjustment program supported by the IMF and the World Bank while receiving flow rescheduling on Naples terms from Paris Club creditors and comparable treatment from other official bilateral and commercial creditors. The international community enters into a commitment at the decision point to deliver assistance at the completion point provided the debtor adheres to its policy commitments.

In the context of Paris Club reschedulings, obligations that are not consolidated but postponed nonconcessionally, usually for a short time, as specified in the Agreed Minute.

Established in I960 as the Development Assistance Group with the objective of expanding the volume of resources made available to developing countries and to improve their effectiveness. The DAC periodically reviews both the amount and the nature of its members’ contributions to aid programs, both bilateral and multilateral. The DAC does not disburse assistance funds directly, but is concerned instead with promoting increased assistance efforts by its members. The members of the DAC are Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Ireland, Italy, Japan, Luxembourg, the Netherlands, New Zealand, Norway, Portugal, Spain, Sweden. Switzerland, the United Kingdom, the United States, and the Commission of the European Communities.

Euopean Development Fund.

The proportion of total payments covered by a rescheduling agreement that is rescheduled or deferred until after the consolidation period.

Euopean Investment Bank.

In the context of the Paris Club, debt that can be rescheduled, namely, debt that is contracted before the cutoff date, with maturities of one year or longer.

See concessional rescheduling.

See Structural Adjustment Facility (SAF).

Trust established by the IMF in February 1997 to provide assistance to the countries deemed eligible for assistance under the HIPC Initiative by the Boards of the IMF and the World Bank. Through this trust, the IMF will provide grants (or, in exceptional circumstances, highly concessional loans) that will be used to retire a country’s obligations falling due to the IMF after the completion point.

Accounts in offshore banks (outside the debtor country) through which a portion of the export proceeds of a debtor is channeled. Typically involve balances of one year to cover future debt-service payments. Creditors who are the beneficiaries of such accounts thus obtain extra security for their loans and effective priority on debt service.

European Union.

A loan extended to finance a specific purchase of goods or services from within the creditor country. Export credits extended by the supplier of goods are known as supplier’s credits; export credits extended by the supplier’s bank are known as buyer’s credits. (See also officially supported export credits.)

In the context of export credits, the total amount of a country’s debt held by an export credit agency, including commitments, arrears, and unrecovered claims. Implicitly, a measure of the total possible financial cost to the agency of a complete default by the borrowing country.

An IMF lending facility established in 1974 to assist member countries in overcoming balance of payments problems that stem largely from structural problems and require a longer period of adjustment than is possible under a Stand-By Arrangement. A member requesting an extended arrangement outlines its objectives and policies for the whole period of the arrangement (typically 3 years) and presents a detailed statement each year of the policies and measures it plans to pursue over the next 12 months. The phasing and performance criteria are comparable to those of Stand-By Arrangements, although phasing on a semiannual basis is possible. Countries must repay EFF resources over 10 years including a grace period of 4½ years. (See Stand-By Arrangement.)

In the context of the Paris Club, the rescheduling of specified debt service falling due during the consolidation period and, in some cases, of specified arrears outstanding at the beginning of the consolidation period. (See stock-of-debt operation.)

Clause used in Paris Club agreements under which creditors agree in principle, but without commitment, to consider favorably subsequent debt-relief agreements for a debtor country that remains in compliance with the rescheduling agreement as well as with its IMF arrangement and that has sought comparable debt relief from other creditors. The clause can be for a future flow rescheduling or a stock-of-debt operation.

During the grace period of a loan, no principal repayments (amortization) need to be made; only interest payments are due. Maturity refers to the total repayment period, including the grace period. In the context of Paris Club reschedulings, periods until the first and last payment dates are measured typically from the midpoint of the consolidation period.

In the context of Paris Club reschedulings, the term refers to a repayment schedule where principal repayments (and therefore total payments) gradually increase over the repayment period, reflecting an expected improvement in the repayment capacity of a debtor country. Creditors have made increasing use of the graduated payments, replacing flat payment schedules where equal amounts of principal repayments were made over the repayment period; from the creditor perspective, graduated payments provide for principal repayments starting earlier, and, from the debtor perspective, they avoid a large jump in debt service falling due.

Measure of concessionality of a loan, calculated as the difference between the face value of the loan and the sum of the discounted future debt-service payments to be made by the borrower expressed as a percentage of the face value of the loan.

Transactions involving the sale of commodities against payment in the recipient country’s currency or loans in a foreign currency repayable in the recipient country’s currency. These transactions are treated as grants in the OECD-DAC statistics because their repayment does not require a flow of foreign currency across the exchanges. They are nevertheless counted as external debt, because the creditor is nonresident and subsequent use of the repayments by the creditor involves forgoing the corresponding inflow of foreign exchange.

Group of 41 developing countries established for analytical purposes in 1995. It includes 32 countries with a 1993 GNP per capita of $695 or less and whose 1993 present value of debt to exports is higher than 220 percent or whose present value of debt to GNP is higher than 80 percent (World Bank classification of severely indebted low-income countries). Also includes 9 countries that have received concessional reschedulings from Paris Club creditors (or are potentially eligible for such rescheduling).

Agreement reached in 1978 by OECD participants of the Consensus limiting the use of tied-aid credits in certain countries to projects that would not be commercially viable without an aid element. The agreement also set up mechanisms for implementing the new rules. (See OECD Consensus.)

Framework for action to resolve the external debt problems of heavily indebted poor countries (HIPCs) that was developed jointly by the IMF and the World Bank and was adopted in the fall of 1996. The Initiative envisages comprehensive action by the international financial community, including multilateral institutions, to help eligible HIPCs achieve debt sustainability, provided they build a track record of strong policy performance.

Trust Fund administered by the International Development Association to provide debt relief through giants to eligible HIPCs on debt owed to participating multilaterals. It will either prepay, or purchase, a portion of the debt owed to a multilateral creditor and cancel such debt, or pay debt service, as it comes due. The HIPC Trust Fund receives contributions from participating multilateral creditors and from bilateral donors. Contributions can be earmarked for debt owed by a particular debtor or to a particular multilateral creditor. Donors can also provide contributions to an unallocated pool and would participate in decisions regarding the use of these unallocated funds. The Trust Fund allows multilateral creditors to participate in the Trust Fund in ways consistent with their financial policies and aims to address the resource constraints for certain multilateral creditors. (See also ESAF-HIPC Trust.)

See lower-middle-income-country terms.

Internation Bank for Reconstruction and Development.

International Center for the Settlement of Investment Disputes.

Inter-American Development Bank.

International Fund for Agricultural Development.

International Finance Corporation.

Agreement between the IMF and a member country on the basis of which the IMF provides financial assistance to a member country seeking to redress its balance of payments problems and to help cushion the impact of adjustment. Nonconcessional resources are provided mainly under Stand-By Arrangements and the Extended Fund Facility (EFF), and concessional resources are provided under the Enhanced Structural Adjustment Facility (ESAF).

See bilateral agreements.

An agreement to swap the debt-servicing liability of a loan with a fixed interest rate with that of a loan with a variable interest rate. For example, the government of a developing country may be able to borrow at comparatively better terms at variable rates than at fixed rates, while for an enterprise in an industrial country, the inverse may be true. Each may prefer its liabilities in the other form; they therefore borrow and arrange a swap. Normally, the differentia) in the rates is insured with a broker to protect the sounder borrower.

IDA is the concessional lending arm of the World Bank Group. IDA assistance is available to low-income member countries.

Interest accrued on principal and interest in arrears.

A group of commercial banks that join together to negotiate the restructuring of their claims against a particular sovereign debtor. There is no organizational framework for the London Club comparable to that of the Paris Club.

See concessional rescheduling.

In the context of the Paris Club, a nonconcessional option in concessional reschedulings under which the consolidated amount is rescheduled over a long period of time, but without a reduction in the net present value of the debt.

In the context of the Paris Club, countries eligible to receive concessional terms. The Paris Club decides eligibility on a case-by-case basis, but these include only countries eligible to receive highly concessional IDA credits from the World Bank. In the context of the World Bank classification, low-income countries are those with a GNP per capita income of no more than $765 in 1995.

In the context of the Paris Club, refers to the rescheduling terms granted, since September 1990, to lower-middle-income countries. These terms are nonconcessional and originally provided for flat repayment schedules, but in recent years graduated payment schedules have often been agreed upon for commercial credits, namely, with a maturity of up to 18 years, including a grace period of up to 8 years. Official development assistance credits are rescheduled over 20 years, including a grace period of up to 10 years. This set of rescheduling terms also includes the limited use of debt swaps on a voluntary basis.

See concessional rescheduling.

Grace period plus repayment period. See grace period and maturity.

In the context of the Paris Club, countries not considered lower-middle-income or low-income. These countries receive nonconcessional rescheduling terms, originally with flat repayment schedules, but in the 1990s increasingly with graduated payment schedules that have a maturity of up to 15 years and a grace period of 2–3 years for commercial credits. Official development assistance credits are rescheduled over 10 years, including a grace period of 5-6 years. In the context of the World Bank classification, middle-income countries are those with a GNP per capita income in 1995 of between $766 and $9, 386.

Multilateral Investment Fund.

Multilateral Investment Guarantee Agency.

Credits containing an aid element, in the form of either a grant or a subsidized interest rate.

Interest charged on rescheduled debt. In the Paris Club, the moratorium interest rate is negotiated bilaterally by the borrowing country with each individual creditor and therefore differs from one creditor to the next. In the London Club, where all creditors are deemed to have access to funds at comparable rates, the moratorium interest rate applies equally to all rescheduled obligations under a given agreement.

These creditors are multilateral institutions such as the IMF and the World Bank, as well as other multilateral development banks.

An agreement granted by official creditors that covers consolidation periods of two or more years in accordance with multiyear IMF arrangements, such as the EFF and the ESAF. It is carried out through a succession of shorter consolidations (tranches) that are implemented after certain conditions specified in the Agreed Minute are satisfied. The conditions generally include full implementation to date of the rescheduling agreement and the continued implementation of the IMF arrangements.

See concessional rescheduling.

Loan disbursements minus principal repayments during the same period.

The discounted sum of all future debt-service obligations (interest and principal) on existing debt. Whenever the interest rate on a loan is lower than the discount rate, the resulting NPV of debt is smaller than its face value, with the difference reflecting the grant element. The discount rates used in the context of the HIPC Initiative reflect market interest rates.

Net present value (NPV) of debt as a percentage of exports (usually of goods and nonfactor services).

Loan disbursements minus debt-service payments (principal repayment and interest) during the same period.

This is debt that is wholly or partly excluded from rescheduling. It has to be repaid on the terms on which it was originally provided, unless creditors agree to defer it.

Organization for Economic Cooperation and Development.

Formally, the Arrangement on Guidelines for Officially Supported Export Credits, a framework of rules governing export credits agreed to by members of the OECD’s export credit group.

A forum in which 22 OECD member countries participate in the Arrangement on Guidelines for Officially Supported Export Credits (the Consensus). Mexico and Turkey also attend as observers. Aside from coordinating export credit terms, the OECD Export Credit Group has also served as a forum for exchanging information on debtor country situations and agencies’ practices; at the meetings of the group, the governmental authorities of the agencies are represented.

Public sector lenders. Some are multilateral, namely, international financial institutions, such as the IMF, the World Bank, and regional development banks. Others are bilateral, namely, agencies of individual governments (including central banks), such as export credit agencies.

Flows of official financing defined by the OECD to meet the following test: (1) its main objective is to promote the economic development and welfare of the developing countries, and (2) it is concessional in character and contains a grant element of at least 25 percent (using a fixed discount rate of 10 percent). ODA is provided to developing countries and to multilateral institutions by OECD-DAC members and other countries through their official agencies, including state and local governments, or by their executive agencies. ODA is also provided to developing countries by multilateral institutions. Lending by export credit agencies—with the pure purpose of export promotion—is excluded.

Total official flows to developing countries excluding officially supported export credits (the latter are regarded as primarily trade promoting rather than development oriented). Comprises official development assistance (ODA) and other official development finance flows.

An agency within a creditor country that provides loans, guarantees, or insurance to finance the specific purchase of goods for export. (See officially supported export credits.)

Loans or credits to finance the export of goods and services for which an official export credit agency in the creditor country provides guarantees, insurance, or direct financing. The financing element—as opposed to the guarantee/insurance element—may derive from various sources. It can be extended by an exporter (supplier’s credit), or through a commercial bank in the form of financial trade-related credit provided either to the supplier (also supplier’s credit) or to the importer (buyer’s credit). It can also be extended directly by an export credit agency of the exporting countries, usually in the form of medium-term finance as a supplement to resources of the private sector, and generally for export promotion for capital equipment and large-scale, medium-term projects. Under OECD Consensus rules covering export credits with a duration of two years or more, up to 85 percent of the export contract value can be financed.

Development-oriented official flows that do not qualify as official development assistance. Bilateral “other” ODF includes mainly refinancing loans and the capitalization of interest in debt-restructuring agreements.

Informal group of creditor governments that has met regularly in Paris since 1956 to reschedule bilateral debts; the French treasury provides the secretariat. Creditors meet with a debtor country to reschedule its debts as part of the international support provided to a country that is experiencing debt-servicing difficulties and is pursuing an adjustment program supported by the IMF. The Paris Club does not have a fixed membership, and its meetings are open to all official creditors that accept its practices and procedures. The core creditors are mainly OECD member countries, but other creditors attend as relevant for a debtor country. Russia became a member in September 1997.

The risk of borrower country government actions that prevent, or delay, the repayment of export credits. Many export credit agencies also include under political risk such events as war, civil strife, revolution, and other disturbances that prevent the exporter from performing under the supply contract or the buyer from making payment. Some also include physical disasters such as cyclones, floods, and earthquakes.

See cutoff date.

In the context of export credits, the amount paid, usually in advance, by insured lenders as the price of the insurance. An important source of income for export credit agencies.

Debt that has been rescheduled on a prior occasion. This type of debt was generally excluded from further rescheduling in both the Paris and London Clubs until 1983. Since then, however, previously rescheduled debt has frequently been rescheduled again for countries facing acute payment difficulties.

Allowance made in some export credit agencies’ accounts for the financial cost of possible losses on their exposure. Some agencies provision on all new business; some reject the idea of provisioning against political risk, maintaining that all sovereign debt will ultimately be repaid.

Mechanisms by which export credit agencies restrict the amount of cover offered to a particular country. They could, for example, take the form of limits on the total cover for a country or on the amount of cover offered for individual transactions. The limit set is an important means of reducing exposure to countries considered to be risky.

An IMF program of assistance established in 1990 whereby a member country with long overdue obligations to the IMF, while still in arrears, may accumulate “rights” toward a future disbursement from the IMF on the basis of a sustained performance under an IMF-monitored adjustment program. Countries incurring arrears to the IMF after end-1989 are not eligible for assistance under this program. Rights Accumulation Programs adhere to the macroeconomic and structural policy standards associated with programs supported by the EFF and the ESAF, and performance is monitored, and rights accrue, quarterly.

Repayments made to export credit agencies by borrowing countries after agencies have paid out claims to exporters or banks on the loans concerned.

See debt refinancing.

Reinsurance by export credit agencies of amounts originally insured by a private sector insurer or commercial bank (some large official agencies are also providing reinsurance for smaller official agencies). For example, a private insurer might keep the commercial risk of a loan on its own books, but seek reinsurance against specific political risks.

The period during which repayments under the financing are due to be made; this period usually starts after the end of performance under the commercial contract.

Debt restructuring in which specific arrears and future debt service (falling due during the consolidation period) are consolidated and form a new loan, with terms defined at the time of the rescheduling. Rescheduling debt is one means of providing a debtor with debt relief through a delay and, in the case of concessional rescheduling, a reduction in debt-service obligations. For official bilateral creditors, the main forum for negotiating debt rescheduling is the Paris Club. Rescheduling is typically provided by the international financial community in order to support a debtor country’s economic adjustment program.

An agreement between a creditor, or a group of creditors, and a debtor to reschedule debt. The agreement may also include other debt-restructuring strategies such as write-offs or swaps.

Commitments that provide for repayment within a short period, usually six months (although some export credit agencies define short-term credits as those with repayment terms of up to one or two years). Usually relating to sales of consumer goods and raw materials and usually taking the form of policies for whole-turnover or comprehensive coverage. Short-term debt in the context of the Paris Club has a maturity of up to one year.

In the context of the Paris Club, deposits into special accounts were first introduced in 1983 for debtor countries that had a history of running into arrears. After signing the Agreed Minute, the debtor makes monthly deposits into an earmarked account at the central bank of one of the creditor countries. The deposit amounts are roughly equal to the moratorium interest that is expected to fall due on the rescheduled debt owed to all Paris Club creditors combined and any other payments falling due during the consolidation period. The debtor then draws on the deposited funds to make payments as soon as the bilateral agreements with the individual Paris Club creditors are signed and as other payments fall due.

See middle-income countries.

An IMF lending facility established in 1952 through which a member country can use IMF financing up to a specified amount to overcome short-term or cyclical balance of payments difficulties. Installments are normally phased on a quarterly basis, with their release conditional upon the member’s meeting performance criteria and the IMF’s completing periodic reviews. Performance criteria generally cover credit policy, government or public sector borrowing requirements, trade and payment restrictions, foreign borrowing, and reserve levels. These criteria allow both the member and the 1Mb to assess the member’s progress in policy implementation and may signal the need for further corrective policies. Stand-By Arrangements typically cover a period of 12-18 months (although they can extend up to 3 years). Repayments are to be made over 5 years including a grace period of 3¼ years.

This is an interim agreement between a debtor country and its commercial banking creditors that principal repayments of medium- and long-term debt will be deferred and that short-term obligations will be rolled over, pending agreement on a debt reorganization. The objective is to give the debtor continuing access to a minimum amount of trade-related financing while negotiations take place and to prevent some banks from abruptly withdrawing their facilities at the expense of others.

In the context of the Paris Club, rescheduling of the eligible stock of debt outstanding. These were granted for Egypt and Poland in 1991 and, partially, for Russia and Peru in 1996 and are being implemented for low-income countries under Naples terms (see concessional reschedulings), provided that certain conditions are met (the debtor country has implemented earlier flow rescheduling agreements for at least three years and has an appropriate arrangement with the IMF; all creditors choose a concessional rescheduling option). Six countries received stock-of debt operations on Naples terms between 1995 and mid-1997 (Benin, Bolivia, Burkina Faso, Guyana, Mali, and Uganda).

The SAF, established in 1986 and no longer operational, and the ESAF, established in 1987 and extended and enlarged in 1993, are the concessional loan windows of the IMF. These facilities are available to low-income member countries facing protracted balance of payments problems and provide resources at an annual interest rate of 0.5 percent. They are repayable over 10 years, including a grace period of 5½ years.

Policy of Paris Club creditors that loans extended after the cutoff date are not subject to rescheduling; therefore, pre-cutoff date loans are effectively subordinated to new lending.

A financing arrangement under which an exporter extends credit to the buyer in the importing country.

Paris Club rescheduling involving only a small number of creditors. Typically this does not require a rescheduling meeting between the debtor country and its creditors, with the agreement being reached through an exchange of letters.

Bilateral loans that are linked to purchases from the country providing the loans.

See concessional rescheduling.

The risk that a borrower will not be able to convert local currency into foreign exchange, and so will be unable to make debt-service payments in foreign currency. The risk would usually arise from exchange restrictions imposed by the government in the borrower’s country. This is a particular kind of political risk.

See claims payments.