This paper reviews recent developments in multilateral official debt restructuring during 1988 and 1989.1 This period was marked by two significant trends: debtor countries increasingly relied on debt reschedulings through the Paris Club and official creditors further adapted their policies in response to protracted problems in the most heavily indebted low-income countries.2
From 1976 through 1989, 50 debtor creditors concluded 150 multilateral rescheduling agreements with official creditors for a cumulative cash-flow relief of nearly $110 billion.4 During the first half of the 1980s, Paris Club creditors consolidated $19 billion in 46 reschedulings for 21 countries. Activity in the Paris Club more than doubled during the second half, as 45 debtor countries obtained 93 rescheduling agreements and the amount consolidated by official creditors more than quadrupled to $85 billion.
Official creditors have provided cash-flow relief to a large number of low-income countries through Paris Club reschedulings. SAF- and ESAF-eligible countries account for half of the Paris Club rescheduling countries but were involved in nearly two thirds of the reschedulings since 1976, as most of these countries had repeatedly sought relief from the Paris Club (Chart 6). Generally the reschedulings for these countries were more comprehensive in coverage and percentage of debts rescheduled than those for other creditors. However, given the protracted nature of their balance of payments problems, many of these countries experienced serious difficulties in adhering to the repayment schedules from previous agreements, largely because, as creditors recognized, the repeated application of standard terms over a long period had not provided an adequate response to the medium-term debt-servicing problems of the poorest and most heavily indebted countries.
Paris Club negotiations have always given special consideration to the principle that the debtor country should seek comparable treatment from its various creditors, and comparability has long been a standard feature in the Paris Club Agreed Minutes. Paris Club creditors expect a debtor to obtain comparable relief from all other creditor groups to which it has significant debt-service obligations with the notable exception of the multilateral institutions, whose preferential status has long been accepted by official creditors.