The Paris Club of the world's richest lending nations marked its golden anniversary yesterday, facing questions over its role in a new era of growing wealth in many debtor nations.
Created in 1956 during a meeting in Paris of creditor nations for Argentina, the 19 Paris Club members, covering the globe from Germany and Switzerland to Japan and the US, have some 400 agreements worth about US$500 billion in its 50-year history.
But at the half century mark, the leading government creditors find themselves confronting a challenge from the growing power of emerging nations -- along with the trend toward debt cancelation of the poorest nations.
Rather than seek loans from the Paris Club, more countries are turning to the new economic powerhouses, such as Brazil and China, which are ready to open their purses.
At the same time, the newly rich nations are paying off their debts.
Profiting from soaring oil prices, Algeria and Russia for example have recently been able to make early repayment of part of their debt to the Paris Club, depriving their creditors of interest payments.
The new era has started raising questions about the club's usefulness, according to Jerome Sgard, researcher at the center for prospective studies and international information.
Given that "there are not so many crises and not so many countries in default, they [Paris Club creditors] are losing one after the other a good part of their business," he said.
Xavier Musca, France's director of the treasury, who is currently Paris Club president, put it bluntly: "Once you know that you can be eliminated, you push yourself to be useful."
He says that the Paris Club, which works with its partners the World Bank and the International Monetary Fund, still has a role to play "to assure transparency and fair treatment" with debt.
But like its world financial partners, the Paris Club, though an informal group, has come under fire for being too powerful or too political in its decision-making.
One of the club's recent major decisions involved Iraq. Baghdad received a massive easing of its debt, the total cut by 80 percent.
On the other hand, the club faced a barrage of criticism when it decided to simply reschedule the debt of the Asian countries devastated by the tsunami disaster in December 2004, rather than cancel or even reduce their debt.
The non-governmental group, the Committee for the Cancelation of Third World Debt has called for the Paris Club to fold its tent, in order it says "to finally achieve the total cancelation of debt" in the poorer countries in southern half of the planet.
But yesterday, the Paris Club celebrated its 50th anniversary still in action. This week it will act on the cancelation of debt in the west African nation of Cameroon as part of the initiative for heavily indebted poor nations. It also expects a new request for early repayment of debt from Russia.
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