LONDON, June 24 - The Paris Club of official creditors said in its 2025 annual report that the Common Framework - the mechanism launched by the G20 to facilitate sovereign debt restructurings for low-income countries - requires changes to make restructurings faster and more effective.
The report, presented at the opening of an annual Paris meeting that gathers creditor nations, borrowing countries and investors, collates views from officials and stakeholders on how the Common Framework has functioned since it was created to respond to a wave of defaults following the COVID-19 pandemic.
While the document notes that the share of low-income countries facing debt distress has eased since that surge in defaults, officials emphasised the need to improve the Framework's operational speed and creditor engagement. "The Common Framework must deliver faster and swiftly embark all creditors in delivering comparable efforts," Paris Club Co-Chair Thomas Revial wrote in the report.
Proposals in the report reflect a range of priorities. Some contributors - including representatives from China - urged strict enforcement of the principle of comparability of treatment, which seeks to ensure that non-official creditors accept losses comparable to those taken by official creditors. Other contributions, coming from the International Monetary Fund, the World Bank and Ethiopia, recommended procedural changes to allow all creditors to negotiate the terms of a restructuring concurrently rather than sequentially.
Measured improvement in distress levels, but structural frictions persist
For the first time since 2017, the report states, a majority of low-income countries - 52% - are assessed as being at low or moderate risk of debt distress. The remaining 48% are considered at high risk or already in debt distress. Despite that shift, specific cases underline where the Common Framework's current design creates bottlenecks.
Ghana, Zambia and Chad are cited as countries that have broadly completed restructurings under the Common Framework. By contrast, Ethiopia remains embroiled in a dispute that illustrates several of the Framework's practical challenges.
According to the report, Ethiopia faces a confrontation between investors holding a $1 billion defaulted bond and official creditors, who in March 2025 reached a debt deal in principle. Official creditors, which include China and France, rejected an initial agreement proposed by bondholders on the grounds it fell short of the Framework's comparability of treatment requirement. Bondholders countered that Ethiopia's improved economic outlook did not justify the level of losses official creditors were requesting and warned of legal action.
Astewaye Woldemichael, a senior adviser at Ethiopia's Ministry of Finance, argued in the report that the Framework's sequencing is problematic. He wrote: "The CF's implicit sequencing means that by the time a debtor engages bondholders, the analytical divergence between the IMF and private creditors has not been addressed." He added: "The IMF and OCC need to engage private creditors earlier. Leaving the debtor to bridge this gap is a design flaw."
China presses for enforceable comparability and limits on litigation
China, which is Ethiopia's largest bilateral creditor, criticised threats of legal action by bondholders in the context of these disputes. Xuan Changneng, Deputy Governor of the People's Bank of China, wrote in the report that leaders "should spare no efforts to strictly enforce the principle of Comparability of Treatment." He also urged coordinated legal and technical measures to "curb malicious litigation by bond investors, thereby safeguarding the foundation and credibility of the Common Framework." Xuan did not reference Ethiopia by name in his comments.
The report notes that many in the debt community - including legal advisers and some bondholders - see the prospect of litigation over the Ethiopia bond as a potential attack on the Framework that could complicate the reaching of comprehensive debt settlements.
Preferred Creditor Status ambiguity complicates burden sharing
Both Xuan and Sonja Gibbs, Managing Director of the International Institute of Finance, called for clearer criteria on which organisations qualify for Preferred Creditor Status (PCS). The report highlights that PCS is not formally defined but generally shields institutions such as the IMF and World Bank from losses. Other institutions have claimed PCS as well and, in some recent restructurings, were nonetheless asked to take losses.
Changaneng wrote: "The lack of clear rules on which institutions qualify for the PCS not only slowed down the pace of restructuring, but also raised concerns over fair burden sharing," and noted that around 100 development financial institutions worldwide are claiming PCS. The report points to cases in which institutions that asserted this status, including Afreximbank, were nevertheless pressured to accept losses in restructurings in Ghana and Zambia.
Outlook
The Paris Club's annual report frames the Common Framework as a necessary but imperfect tool. It records modest improvement in debt distress metrics while documenting disputes and procedural problems that impede timely, comprehensive restructurings. Calls for faster processes, earlier engagement with private creditors, enforceable comparability and clearer rules around PCS dominate the recommendations presented to creditors, borrowers and investors gathered in Paris.
Where the report lays out differing priorities - strict enforcement of comparability on one side and concurrent creditor negotiations on the other - it also underscores the difficulty of balancing competing creditor interests while trying to deliver restructurings that are both timely and perceived as equitable.