From UPSC perspective, the following things are important :
Prelims level : Paris Club, G20
Mains level : Not Much
Chad has become the first country to officially request a debt restructuring under a new common framework “G20 Common Framework” introduced by China and other Group of 20 countries last year with the help of the Paris Club.
What is G20 Common Framework?
- G20 Common Framework is the Common Framework for Debt Treatments beyond the Debt Service Suspension Initiative (DSSI).
- It was announced in November 2020 to deal with the issue of unsustainable debts faced by various countries as an impact of COVID-19.
What is the news?
- This official request of Chad for debt restructuring under the G20 common framework was notified by the International Monetary Fund (IMF).
- The creditors will now soon begin discussions on the first test of the new framework.
- The creditors will also ask China and other private-sector creditors to participate as agreed last year.
- A new four-year programme of Chad worth about $560 million under the Extended Credit and Extended Fund facilities was announced by IMF.
- Chad is under high debt like many other African countries.
Significance of the move
- This is the first time that a country has requested debt restructuring under the framework and the investors will now look at how the framework can work.
- Participation in China is also a question. Last year, G20 Common Framework brought non-members of the Paris Club- India, China, and Turkey to join the framework.
Back2Basics: Paris Club
- Paris Club is a club or group of officials from major creditor countries.
- It was established in the year 1956.
- It aims to find sustainable solutions to the difficulties faced by debtor countries in payments.