Comparability of treatment
Topic: Balance of Payments and Exchange Rates · NCERT: Beyond NCERT
Meaning
Comparability of treatment is a rule used in sovereign debt restructuring, when a government's debts are renegotiated. A debtor country that gets relief from official creditors must get similar terms from all its other creditors, including non-Paris-Club lenders and private bondholders. The aim is to share the burden fairly. Without this rule, one creditor's relief would simply be used to repay another creditor in full. The Paris Club, a group of creditor governments, applies this principle.
Example
After Sri Lanka defaulted in 2022, an Official Creditor Committee co-chaired by India, Japan and France agreed on relief. China negotiated separately. Comparability of treatment requires China and private bondholders to give Sri Lanka broadly similar relief, so that no creditor gains at the others' cost.
Related concepts
- External debt
- Debt service ratio
- Sovereign credit rating
- Sovereign default
- Sovereign debt restructuring
- Official Creditor Committee
- Debt-for-nature swap
- Blended finance