“A multilateral mechanism for coordinating sovereign debt restructuring across G20 bilateral creditors including China, India, Saudi Arabia, and traditional Paris Club members designed to address the fragmentation that makes modern debt crises harder to resolve than those of the 1980s-90s.” Adopted by the G20 in November 2020, the Framework was intended to update the Paris Club’s creditor coordination model for a world in which China has become the world’s largest bilateral creditor to low-income countries.
Executive Summary
The G20 Common Framework was created to solve a structural problem: the 1980s-90s debt restructuring playbook depended on Paris Club coordination among Western bilateral creditors, but that playbook became obsolete when China’s policy banks EXIM Bank of China and China Development Bank became the dominant bilateral lenders to Africa and parts of Asia. By 2020, China held an estimated 35-40% of the bilateral external debt of low-income countries more than the entire Paris Club combined but was not a Paris Club member and had no established protocol for participating in coordinated restructurings. The Common Framework was meant to fill this gap. By 2024, the record was disappointing: four countries had formally applied (Chad, Ethiopia, Zambia, Ghana), and all experienced prolonged delays measured in years rather than months. The root causes disagreement on debt relief comparability between China and Western creditors, inadequate IMF financing backstops during negotiations, and unclear framework governance remained unresolved despite iterative reform efforts.
The Strategic Mechanism
The Common Framework operates through a four-stage process:
- Application and eligibility: Debtor country requests treatment under the Framework; G20 finance ministers confirm eligibility for countries with debt unsustainability certified by an IMF/World Bank DSA; an IMF program must be in place or under negotiation simultaneously
- Creditor committee formation: A creditor committee forms, co-chaired by a Paris Club member and a non-Paris Club creditor (in practice, typically China co-chairs alongside France); composition reflects all bilateral G20 creditors holding significant claims the co-chair dynamic is the structural innovation meant to integrate China into the process
- Comparability of treatment: Creditors agree among themselves on the total debt relief needed, then each creditor provides relief “at least comparable” to what other creditors are providing the “comparability” principle is borrowed from Paris Club doctrine but its application to Chinese non-concessional loans, often collateralized by commodity revenues, has been contested
- Commercial creditor participation: The Framework expects commercial creditors (Eurobond holders, commodity traders) to provide comparable treatment to bilateral creditors; but this has no enforcement mechanism, and Eurobond holders cannot negotiate until IMF/bilateral frameworks are finalized, creating a sequencing problem
Market & Policy Impact
- Zambia’s restructuring took over three years from default (November 2020) to final agreement (October 2023), with most of the delay attributable to Common Framework coordination failures between Chinese and Paris Club creditors a period during which Zambia’s IMF program was approved but disbursements were constrained
- Ethiopia’s application in 2021 was overtaken by civil conflict and political instability, illustrating how the Framework assumes functioning governments capable of sustained engagement with complex multilateral negotiations
- The “creditor summit” convened by India (as G20 President) in September 2023 in Marrakech finally produced agreement on Zambia and Sri Lanka, demonstrating that high-level political intervention can unblock technical impasses but also that the process requires continuous senior diplomatic investment
- IMF and World Bank estimated in 2023 that approximately 25 IDA-eligible countries need debt restructuring, but only 4 have applied to the Common Framework with most countries either restructuring bilaterally with China, seeking alternative financing, or deferring resolution
- The “Global Sovereign Debt Roundtable” launched in 2023, convening debtor countries, bilateral creditors, and private creditors under joint IMF/World Bank/G20 Presidency facilitation, represents an attempt to address coordination failures outside the formal Framework including through developing common data sharing standards and comparability methodologies
Modern Case Study: Chad’s Framework Application and the Glencore Complication, 2021-2023
Chad was the first country to formally apply for Common Framework treatment in January 2021, but its case illustrated a complication the Framework designers had not anticipated: Chad’s largest creditor was not a government but a commodity trading company. Glencore held approximately $900M in oil-backed loans to Chad, making it simultaneously a commercial creditor and the key variable in debt sustainability. Bilateral creditors refused to finalize their treatment until Glencore provided comparable relief; Glencore insisted commercial creditors negotiate separately. The standoff lasted nearly two years before a resolution in November 2022 restructured Glencore’s loans and allowed bilateral creditor agreements to finalize. Chad’s experience established the important precedent that commodity-backed loans to public entities cannot be treated as purely commercial obligations immune from comparability requirements but also demonstrated that the Framework has no enforcement mechanism to compel commercial creditor participation.