The Paris Club of creditor nations has called for urgent reforms to the G20’s Common Framework, a key initiative for sovereign debt restructuring in low-income countries. In its 2025 annual report, released at a meeting in Paris, the group emphasised the need for the framework to become faster and more efficient. The Common Framework is a platform launched by the G20 to speed up sovereign debt restructurings for low-income countries, while the Paris Club is a group of official creditors that coordinates financial solutions for debtor countries. While the proportion of countries facing debt distress has ebbed since an upsurge following the COVID-19 pandemic, officials highlighted ongoing inefficiencies. The report noted a positive shift, with 52% of low-income countries now at low or moderate risk of debt distress, marking the first time since 2017 that this figure has surpassed those at high risk or already in distress.
Despite this improvement, the report underlined that the Common Framework “must deliver faster and swiftly embark all creditors in delivering comparable efforts,” according to Paris Club Co-Chair Thomas Revial. Proposals for reform varied, with China advocating for stricter enforcement of “comparability of treatment” – a principle requiring all creditors to accept similar losses. Conversely, the International Monetary Fund, World Bank, and Ethiopia suggested allowing all creditors to negotiate agreement terms simultaneously during a restructuring process.
The ongoing debt dispute involving Ethiopia, which is caught between its defaulted bondholders and official creditors, exemplifies the framework’s challenges. Official creditors, including China and France, rejected an initial agreement from bondholders as inadequate under the comparability principle, leading to threats of legal action from investors. Ethiopia’s Ministry of Finance senior adviser, Astewaye Woldemichael, criticised the framework’s design, stating that the IMF and official creditors need to engage private creditors earlier to avoid leaving the debtor to bridge analytical gaps. Xuan Changneng, Deputy Governor of the People’s Bank of China, also criticised bondholders threatening litigation, calling for coordinated efforts to “curb malicious litigation” and safeguard the Common Framework’s credibility. Both Changneng and International Institute of Finance Managing Director Sonja Gibbs also called for clearer rules on Preferred Creditor Status, a status that protects some creditors from losses but currently lacks formal definition, leading to concerns over fair burden sharing.
