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Cablegate: Paris Club - December 2008 Tour D'horizon and Discussions

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UNCLAS SECTION 01 OF 23 PARIS 002344


SENSITIVE
SIPDIS

STATE FOR EEB/IFD/OMA
TREASURY FOR DO/IDD AND OUSED/IMF
SECDEF FOR USDP/DSCA
PASS EXIM FOR CLAIMS - MPAREDES
PASS USDA FOR CCC -- ALEUNG/WWILLER/JDOSTER PASS USAID FOR CLAIMS --
WFULLER
PASS DOD FOR DSCS -- PBERG

E.O. 12958: N/A
TAGS: EFIN ECON EAID XM XA XH XB XF FR
SUBJECT: PARIS CLUB - DECEMBER 2008 TOUR D'HORIZON AND DISCUSSIONS
ON METHODOLOGICAL ISSUES

1. (SBU) Summary: The December 2008 Paris Club Tour d'Horizon
included Argentina, Burundi, Comoros, Congo, Cote d'Ivoire, Ecuador,
Grenada, Guinea, Guinea-Bissau, Iraq, Pakistan, the Seychelles, Sri
Lanka, and Togo. Argentine Economy Minister Fernandez had told the
Secretariat that repayment was still "politically relevant," but
that "technical conditions" for repayment no longer applied in the
short term. Both sides had agreed to continue technical contacts,
including efforts to reconcile late interest. The IMF conceded that
Cote d'Ivoire's performance under its Emergency Post-Conflict
Assistance (EPCA) program had been weak, and indicated that
financing gaps for 2008 and 2009 still needed to be filled before a
new Poverty Reduction and Growth Facility (PRGF) program could be
approved. Creditors expressed divergent views about the
implications of the timing of the IMF's assessment of Cote
d'Ivoire's qualification for debt relief under the Heavily Indebted
Poor Countries (HIPC) Initiative; the IMF asserted that a delay
beyond March 2009 might prevent Cote d'Ivoire from qualifying, given
more recent debt data. The Club agreed to enter into force on
December 17 the final tranche of Iraq's 2004 debt relief. The IMF
reported Sri Lanka's financial situation had become "very
precarious," and that the country could be forced to seek an IMF
program and Paris Club debt relief. The Secretariat strongly
supported the Seychelles' request that the Paris Club commit to a
two-stage debt treatment a "flow" rescheduling followed by a
"stock-of-debt" reduction in the upcoming negotiation - in order to

PARIS 00002344 002 OF 023


maximize the chances that private sector creditors will provide
comparable treatment.

2. (U) The Club also discussed four methodological issues (outreach
to non-Paris Club creditors, so-called "illegitimate" debt, the
global financial crisis, and updates to the Paris Club website) and
provided preliminary approval of additional debt relief for Togo.
On December 11, creditors negotiated a new "Agreed Minutes" with
Congo (Brazzaville) that resumes interim HIPC debt relief. Because
of Congo's high capacity to pay, creditors provided only the
standard debt relief terms, which will include cancellation of $643
million and rescheduling of $119 million over the 2008-2010 time
period. End Summary.

---------
Argentina
---------

3. (SBU) The Secretariat reported on a meeting with Economy
Minister Fernandez on the margins of the G-20. Fernandez had said
that repayment was still "politically relevant," but that "technical
conditions" for repayment no longer applied in the short term. Both
sides agreed that technical contacts should continue, including
efforts to reconcile late interest. The IMF reported a significant
deterioration in Argentina's situation, including asset price

PARIS 00002344 003 OF 023


declines, capital flight ($4.5 billion in October), and falling
growth. In response to a question from the U.S. delegation, the IMF
noted that reserves were still at $46 billion as of end-November
2008. There is no date set yet for an IMF Article IV review,
although the Secretariat reported that the Argentines had agreed to
a Financial Sector Assessment Plan (FSAP) review during the November
15 G-20 meeting. The World Bank expects to receive net financial
flows of $600 million and an estimated $300 million in 2008 and
2009, respectively.

-------
Burundi
-------

4. (U) Burundi formally entered the enhanced Heavily Indebted Poor
Countries (HIPC) Initiative process (decision point) in 2005 and
could qualify for full debt cancellation (completion point) as early
as January 2009, along with the first review of its IMF program.
The IMF reported that Burundi's performance had been broadly
satisfactory, with quantitative criteria already met and progress on
structural criteria. The World Bank reported good progress on
Burundi's reform commitments. The Bank representative warned,
however, that Burundi would remain at high risk of debt distress
even after completion point, due to its very low export base.


PARIS 00002344 004 OF 023


-------
Comoros
-------

5. (U) The IMF reported that Comoros' track record of implementing
economic reforms had weakened significantly since 2006 because of
the political situation, global food and fuel prices, and economic
stagnation. The country was unable to meet its commitments; arrears
were accumulating. The ratio of debt to GDP (net present value
basis) had reached 236 percent. Because of the political situation,
Comoros had been unable to obtain an IMF program under the Poverty
Reduction and Growth Facility (PRGF). Comoros had requested about
$5.1 million in IMF financing under a six-month Emergency
Post-Conflict Assistance (EPCA) program and the rapid access
component of the Exogenous Shocks Facility. The country's
performance under the current EPCA could eventually pave the way for
a PRGF program and HIPC debt relief. Subsequent to the Paris Club
discussion, the IMF Executive Board approved both facilities on
December 15. The IMF also reported that an upcoming donors'
conference would seek additional support and that Comoros would
likely continue to accumulate arrears, including to Paris Club
creditors.

-------------------------------
Republic of Congo (Brazzaville)

PARIS 00002344 005 OF 023


-------------------------------

6. (SBU) On December 11, Paris Club creditors and Congolese Finance
Minister Pacifique Issoibeka agreed on a debt restructuring accord
that resumes Congo's HIPC debt relief,
(suspended in September 2006). Brazil, a non-Paris Club creditor,
also signed the "Agreed Minutes," which set the terms for each
creditor to implement the deal bilaterally. Under the new
three-year Agreed Minutes, $643 million will be cancelled and $119
million will be rescheduled, provided Congo's track record of
performance on its PRGF program is satisfactory. The Secretariat's
analysis showed a very strong payment capacity because of oil
revenues, unusual for a HIPC country. As a result, creditors denied
several of Congo's requests for exceptional terms, such as further
restructuring debts already treated in the 2004 Agreed Minutes.

7. (SBU) There was some discussion of so-called "vulture funds"
(litigating creditors) after the U.S. delegation asked Finance
Minister Issoibeka to clarify an apparent contradiction in different
GROC documents about whether the cases had been "extinguished."
Based on the minister's ambiguous responses, our understanding is
that the legal claims are on hold for now because of a $180 million
GROC "goodwill" payment and the standstill agreement; the financial
claims against the GROC still exist. Finance Minister Issoibeka
described how aggressive litigating creditors had seized oil and

PARIS 00002344 006 OF 023


export income, as well as official development assistance from
Belgium that was intended to support construction of a power plant.
According to the minister, neither IMF and World Bank calls against
such litigation, nor the GROC's own pleas for help from its
international partners, had had any effect.

8. (SBU) Given many creditors' concerns about litigating creditors'
claims against Congo, the U.S. delegation suggested during the
December 10 tour d'horizon that the Club strengthen the conditions
for the entry-into-force clauses of phases 2 and 3 for Congo and all
future HIPCs. (Note: A key principle of Paris Club debt treatments
is the requirement that a debtor country must seek the same or
"comparable" debt relief from its non-Paris Club creditors.) In the
December 11 negotiation, the GROC delegation accepted both the
requirement to submit reports prior to the IMF's Board discussions
and the financial terms the Club offered.

9. (SBU) There was relatively little discussion of creditors'
concern that Congo's $1.6 billion framework agreement with China
threatened debt sustainability. Following up on GROC written
clarifications provided in November at the Paris Club's request,
Minister Issoibeka assured the Club that Congo would respect the
concessionality requirements (minimum 50 percent grant element) of
its new PRGF program. Issoibeka asserted that the 2006 framework
agreement with the PRC would allow for investments in priority

PARIS 00002344 007 OF 023


sectors, generate exports, and improve Congo's payment capacity.
Given the IMF's confirmation that its debt sustainability analysis
had taken Congo's expected new borrowing from China into account,
creditors did not ask Issoibeka for further information. The IMF
representative reported that Congo could complete the HIPC
initiative ("completion point") as early as May 2009, which would
trigger cancellation of Congo's remaining eligible debts to
bilateral and multilateral lenders.

-------------
Cote d'Ivoire
-------------

10. (U) The IMF reported ongoing negotiations on a PRGF program.
Despite prior fiscal slippages, the government had indicated that it
was committed to remedial measures, safeguards, and transparency.
The IMF hoped that the Executive Board could approve a PRGF program
in February or March; however, 2008 and 2009 financing gaps still
needed to be filled. The significant donor support Cote d'Ivoire
needs through 2011 had been delayed due to weak policy. Market
tightening had prevented Cote d'Ivoire from raising financing on the
West African Economic and Monetary Union (WAEMU) market. As a
result, clearance of arrears at the African Development Bank (AfDB)
has been delayed. Paris Club Co-Chairman Benoit Coeure reported
that his recent meeting with the Ivoirian Finance Minister

PARIS 00002344 008 OF 023


corroborated the IMF's assessment. The poor cocoa crop, lower cocoa
prices, and liquidity problems in the WAEMU bond market had
contributed to a very tense cash flow situation. However, the
country was setting up a special account for oil revenues, which
would be transparent and audited.

11. (SBU) The IMF also explained that the December 12 Executive
Board meeting would address Cote d'Ivoire's performance track
record, noting that the Board had sufficient discretion to allow
performance under an EPCA program to be acceptable to qualify for
the HIPC Initiative. (Note: The December 12 Board meeting was
inconclusive. IMF staff awaits final performance on the current
EPCA program before recommending whether Cote d'Ivoire should enter
the HIPC process as it begins its PRGF program or, as the USG
advocates, wait until the first PRGF review. End Note.) The IMF
underscored that postponing a decision on Cote d'Ivoire's
qualification for HIPC until after March 2009 could mean that the
country might not be eligible. Under IMF rules, more recent figures
would have to be used in taking a HIPC-related decision after March
2009, and end-2008 data would likely show lower indebtedness ratios.
Failure to qualify for HIPC would also prevent Cote d'Ivoire from
benefiting from the Multilateral Debt Relief Initiative (MDRI), a
more valuable prize than HIPC debt relief. The IMF also conceded,
however, that Cote d'Ivoire could conceivably still receive HIPC and
MDRI later on the basis of end-2009 data.

PARIS 00002344 009 OF 023

12. (SBU) There was some discussion about the implications were
Cote d'Ivoire not to qualify for the HIPC Initiative, and what
restructuring the Club would offer in such a situation. The
Secretariat opined that the country did want to benefit from HIPC,
and Germany urged that a way be found to allow Cote d'Ivoire to
qualify for HIPC. The discussion ended inconclusively as all agreed
that this was an issue for the boards of the International Financial
Institutions (IFI).

-------
Ecuador
-------

13. (U) Discussion of Ecuador focused on the External Debt Audit
Commission's recent report, which characterized up to 40 percent of
Ecuador's commercial external debt as either illegitimate or
illegally contracted. The IMF reported that Ecuador's financial
position had worsened, although the banking system was strong, with
little exposure to the international system, and Ecuador would be
able to cover its needs from its liquidity cushion and borrowing
from the Andean Development Corporation (CAF) and the Inter-American
Development Bank (IDB). The World Bank noted the Bank had been
cited in the commission's report, and that the Bank expected net
flows of about $80 million from Ecuador in 2008. Following guidance

PARIS 00002344 010 OF 023


from President Zoellick, the Bank would "find a way" to stop new
disbursements at the first sign of GOE failure to repay debts to the
Bank.

14. (SBU) The Secretariat noted that the commission had also
criticized the Paris Club. The Secretariat suggested possible
responses, including a Paris Club Chairman's letter warning Ecuador
not to default, hardening of export credit terms (noting that some
export credit agencies had halted new lending already), and
coordinating a position at the Inter-American Development Bank
(IDB), where a $1.5 billion loan was under discussion. The
Co-Chairman rejected these ideas for now, urging that the Club wait
to see GOE action on December 15 and status of payments to Club
creditors, saying they could provoke the Ecuadorians further.

15. (SBU) The Spanish delegate complained that the report cited
three loans owed to Spain, and called for a Chairman's letter if
payments were not received. Stressing reputational damage to Spain,
the Spanish delegate criticized the Norwegian delegation for
circulating an NGO document on illegitimate debt (see paras 31-32
below) that included a sentence welcoming Ecuador's decision to
conduct the audit. The Norwegian delegate responded, indicating
that the GON welcomed discussion of the issue but did not approve of
Ecuador's process, which had lacked transparency and balance.


PARIS 00002344 011 OF 023


16. (SBU) Italy said the report had labeled one of its concessional
loans as illegitimate, but that Ecuador had nevertheless just made a
payment on it. Brazil had been heavily criticized in the report,
and its representative noted there were no arrears. The Club agreed
to wait to see whether the GOE defaulted on official debt before
taking action. As of December 22, Ecuador appears to be servicing
its debts to Paris Club creditors.

-------
Grenada
-------

17. (SBU) At issue was Grenada's November 17, 2008 request to
extend its 2006 rescheduling through end-2009. In July 2008, the
IMF Board had completed a long-delayed review of Grenada's PRGF
program, including PRGF extension through April 2010 and boosting
lending by $2.2 million. A second PRGF review took place on
December 12. The IMF reported deterioration since July, including
forecast declines in 2009 for remittances, tourism, and
tourism-related foreign direct investment. The IMF felt that the
new government was committed to the PRGF program and was
implementing reforms. The IMF noted concerns about a proposed loan
from China, but said that the GOG had committed to delay the loan
until late 2009 at the earliest and planned to seek concessional
terms and a smaller amount than originally planned.

PARIS 00002344 012 OF 023

18. (SBU) The Secretariat highlighted that extension of the Fund
program had not assumed extension of the Paris Club's 2006
restructuring. Under questioning, the Fund conceded that the Paris
Club accounted for a small part of Grenada's external debt and that
the program would not unravel if the Club rejected the extension
request. Nevertheless, the IMF argued that Grenada's external
situation had since deteriorated, and that Grenada had reportedly
reached agreement on a "significant" discount below face value with
private creditors. Taiwan's threatened litigation over a credit it
refused to restructure presented an additional obstacle. Similar to
its intervention with respect to the Republic of Congo (Brazzaville)
(see para 8), the U.S. suggested that Grenada provide a report on
comparable treatment before a Club decision on extending its debt
relief. Co-Chairman Coeure and the Club endorsed the idea,
suggesting that creditors could assess Grenada's record of seeking
comparable debt relief from other creditors and Grenada's request in
January 2009.

------
Guinea
------

19. (SBU) The IMF reported that the Executive Board's July 2008
favorable review of Guinea's PRGF program included a $34.9 million

PARIS 00002344 013 OF 023


augmentation to help Guinea cope with external shocks from rising
food and fuel prices. The IMF called the macroeconomic situation
"broadly satisfactory," noting that the GOG had met its fiscal
targets despite social unrest and tension. In early 2009, the IMF
intends to discuss Guinea's exit from the HIPC Initiative
("completion point") and hold the second review of Guinea's PRGF
program. The World Bank reported that Guinea had already met seven
out of the ten performance criteria for completing the HIPC
Initiative. Two criteria were partially met (on auditing of large
government contracts and prenatal consultations); however, there was
slow progress on increasing access to social services. The
Secretariat intends to have negotiations with Guinea in March 2009
to cancel the remaining stock of eligible debt.

-------------
Guinea-Bissau
-------------

20. (SBU) The IMF noted that end-2006 debt (including arrears)
totaled $1 billion (322 percent of GDP). Guinea-Bissau had
benefited from $5.7 million in loan disbursements under the
Emergency Post-Conflict Assistance (EPCA) program approved in
January 2008. Performance had been broadly satisfactory in the
first half of 2008, but had weakened since then. Discussions on a
new PRGF program stalled, however, since Guinea had missed the

PARIS 00002344 014 OF 023


EPCA's June 2008 reform targets and was expected to miss September
ones as well. Guinea was requesting about $5 million under the
Rapid Access Component of the IMF's Exogenous Shocks Facility and
might request additional post-conflict support.

----
Iraq
----

21. (SBU) The IMF reported that Iraq had nearly met the requirement
under the November 2004 Agreed Minutes to complete three years of
continuous performance on an appropriate IMF program. (Note: On
December 17, the IMF Executive Board approved the final review of
Iraq's Stand-By Arrangement (SBA) End note.) The Fund described
Iraq's economic situation - both oil and non-oil - as encouraging.
The World Bank indicated preparation of a new interim strategy;
limited IBRD lending was possible.

22. (SBU) Brazil repeated previous statements that there had been
no progress in implementing the November 2004 Paris Club treatment
since its letter to Paris Club in June 2008, though it was hoping to
schedule a technical meeting in early 2009. The Brazilian
representative claimed that the GOB had been unable to obtain copies
of terms granted to other non-Club creditors and argued that while
Iraq had done well in terms of number of creditors, the GOI had done

PARIS 00002344 015 OF 023


poorly in terms of share of debt treated - particularly since it had
not signed with Saudi Arabia. The Secretariat noted Iraq's recent
report on comparable treatment, declaring that Iraq had met the
Club's terms on comparability, which only required best efforts on
the part of the debtor country and that the country not provide more
favorable terms to any creditor. After a contentious discussion,
creditors decided to use December 17 (the date of the IMF Board
discussion) to enter into force the final phase of debt reduction
and to begin accrual of ordinary interest. The Club also decided to
issue a press release reporting that the last tranche had entered
into force and calling on other creditors to provide comparable
treatment.

--------
Pakistan
--------

23. (SBU) The IMF reported on the impact that food and fuel prices,
followed by the global economic turmoil, had had on Pakistan and
described the reform goals of Pakistan's Stand-By Arrangement.
Pakistan still had large financing requirements, particularly for
the first year, which it hoped to cover through privatization
revenues and additional bilateral support to be discussed at a
donors conference in the new year. When Canada asked whether
Pakistan would come to the Paris Club, the Fund noted that the SBA

PARIS 00002344 016 OF 023


did not envisage a rescheduling; Pakistan's external debt was mostly
commercial, and restructuring it could be difficult and have adverse
effects. In response to a question from the Netherlands, Germany
indicated that it had entered into a euros 40 million swap for
health programs, under which the GOP would have to pay the
equivalent of euros 20 million. Russia complained that Pakistan had
blocked $163 million of Vneshekonombank accounts.

----------
Seychelles
----------

24. (U) The Paris Club had granted financing assurances for
Seychelles in a November conference call, clearing the way for IMF
Board approval of its two-year SBA lending program on November 14.
The Secretariat noted that the GOS had agreed to major reforms, most
notably movement to a floating exchange rate. While Seychelles
wanted to complete its debt restructuring rapidly, ensuring a
comparable treatment of its comparatively large share of external
debt owed to private creditors would be a challenge. The IMF echoed
the far-reaching nature of the SBA's reform goals. The Seychelles
faced major challenges from the global financial crisis (and impact
on tourism). The country was moving forward on the restructuring of
its Eurobond, according to the IMF, and additional outreach to
private creditors was planned for February 2009. The World Bank

PARIS 00002344 017 OF 023


reported that it was near approval of a two-year interim strategy
together with the African Development Bank that envisaged $9 million
of budget support in each year.

25. (U) The Secretariat distributed a December 9, 2008 letter from
the Finance Minister, and observed that treatment would be
difficult, since private creditors would want assurance of the
Club's terms for the overall restructuring before moving forward.
In the Secretariat's view, this would require the Club to commit at
the outset to a "stock-of-debt" reduction to be delivered in a
second stage, even if the first stage was only a rescheduling.
Co-chairman Coeure urged the Club to do its utmost to support a
country that is making best efforts to seek comparable debt relief
from all creditors. The Paris Club will discuss additional options
at its January 2009 meeting; negotiations with the Seychelles could
take place in March.

---------
Sri Lanka
---------

26. (U) The IMF reported that Sri Lanka's financial situation was
deteriorating rapidly. The country had been financing its current
account through remittances, but these had fallen, so it had
resorted to foreign currency borrowing. Since July, financing had

PARIS 00002344 018 OF 023


dried up, reserves had fallen sharply, and the situation had become
"very precarious." Sri Lanka would be hard-pressed to continue its
strong record of servicing debt, according to the IMF. The World
Bank echoed the bleak assessment, noting that tea exports and prices
had fallen, and that garment exports were slowing due to the U.S.
and European recessions. Under a strategy approved this year, the
Bank had a lending envelope of $900 million over three years. The
IMF said that although the authorities had not yet discussed seeking
Paris Club debt relief, such a request could come quickly, since
large amounts were due and external financing options were no longer
available.

----
Togo
----

27. (SBU) Following the IMF and World Bank's November 25, 2008
decision allowing Togo to enter the HIPC Initiative ("decision
point"), Paris Club creditors provided preliminary approval for
additional debt relief. The Fund reported Togo's performance had
been mostly commendable, especially given external shocks and
flooding. Despite a September donors conference and the IMF Board's
approval of a $29 million program augmentation, financial conditions
remained "challenging," according to the IMF, due to the global
situation and difficulties related to privatization and attracting

PARIS 00002344 019 OF 023


foreign investment. The Secretariat agreed to correct several
errors and recirculate for final approval the draft Agreed Minutes
providing Togo with stepped-up debt relief on so-called "Cologne
terms."

------------------------------------
Methodological Discussion:
Outreach to non-Paris Club Creditors
------------------------------------

28. (SBU) The Secretariat reported that it had held "informal,
technical" talks on October 27, 2008 with eleven major non-Club
creditors (Brazil, Bulgaria, China, India, Israel, Kuwait, Romania,
South Africa, South Korea, Turkey and the United Arab Emirates).
Turkey, Kuwait, Romania and Brazil had indicated that they wanted to
be more closely associated with Club discussions, though Turkey had
again suggested that the amount of relief granted should depend in
part on the creditor's level of development, a departure from the
most fundamental Club principle. The Secretariat suggested that it
hold further discussions with these creditors in 2009, and Club
members agreed to defer discussion of the Turkish idea until a later
meeting.

29. (SBU) Co-Chairman Coeure reported that he had attended the
Financing for Development conference in Doha, where Brazil and South

PARIS 00002344 020 OF 023


Africa had played major roles. (Note: As G77 members, Brazil and
South Africa's positions in Doha often were at odds with those of
Paris Club members. End note.) The Doha final outcome document
referred to "equitable" not "comparable" treatment. The Dutch
delegate asserted strongly that the Club's purpose should remain
twofold: (1) to maximize collections, and (2) to ensure that as
much debt as possible is treated on comparable terms. The Club
should not try to attract more members in order to justify its
continued existence, although there is some value in having major
non-Paris Club creditors at the table as had always been the
practice.

30. (SBU) The Club agreed that attracting new members would be
difficult, but that further outreach was desirable. All members
agreed that the Secretariat should send a tentative list of upcoming
negotiations, accompanied by a request for data about claims on
debtor countries, to the 11 countries consulted in October 2008. As
in the case of South Africa and Seychelles, any requests to
participate in future negotiations would be handled on a
case-by-case basis. If a guest creditor blocked consensus, the
Paris Club could ask that creditor to leave a negotiation. Some
creditors had reservations about the Secretariat's proposals;
discussion will continue in January.

--------------------------

PARIS 00002344 021 OF 023


Methodological Discussion:
"Illegitimate" Debt
--------------------------

31. (SBU) Following Norway's request to make a presentation on
so-called "illegitimate" debt, the Norwegian delegate told the Club
that his country approaches debt issues both as a creditor and, more
importantly, as a donor. In Norway, the issue of "illegitimate
debt" had attracted significant attention from the highest political
levels, the NGO community and Norway's state church. Norway wanted
to approach the debate with an open mind, and was providing
financial and other support for studies, such as a Harvard
conference in January 2009 and UNCTAD's work.

32. (SBU) The Secretariat lambasted the concept of illegitimate
debt, noting that many NGOs had outdated views of this issue and did
not recognize that the HIPC and MDRI initiatives had already brought
about significant debt cancellation. Basing debt relief on
"political" considerations, rather than financial need, risked
undermining the basis for demanding comparable treatment from
non-Paris Club creditors. The Secretariat also noted that the
concept of illegitimate debt carried potentially high costs for
debtor countries, as shown by the dramatic rise in Ecuador's bond
spreads. Other creditors attacked the Norwegian position, with the
Netherlands, UK, Australia, and Spain all questioning the Club's

PARIS 00002344 022 OF 023


ability to add value on the topic. Germany, however, welcomed the
discussion and suggested that the Club discuss the topic at a future
meeting. Following strong UK and Dutch opposition, the Secretariat
confirmed there was no consensus to prepare a paper or talking
points for creditors to use in answering questions from civil
society.

--------------------------
Methodological Discussion:
Global Financial Crisis
--------------------------

33. (SBU) At Sweden's request, creditors discussed the financial
crisis and its possible effects on the Club. The IMF reported that
the Board had approved six programs in November following the
current market turmoil and that a "similar number" were under
discussion, although the Fund declined to name countries. The IMF's
ongoing discussions affected mostly middle-income or upper-middle
income countries that owed relatively little debt to Paris Club
creditors, although a number of countries would have to restructure
their private debts. The IMF agreed to alert the Club to countries
likely to request Paris Club debt relief, as it had done with Sri
Lanka.

34. (U) The next Paris Club meeting is scheduled for January 22,

PARIS 00002344 023 OF 023


2009.

35. (U) For more detailed information on any of the above-mentioned
countries, please contact EEB/IFD/OMA David Freudenwald or Nicholle
Manz.

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