Coming to Terms with Reality. Evaluation of the Belgian Debt Relief ...

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Methodological approach of evaluating debt reduction
The creation of such ‘fiscal space’ would enable the government to rechannel budgetary
resources, otherwise leaving the country as debt service payments, into other public
spending (or to use those resources to reduce its fiscal deficits). Of course, fiscal space
effects only materialise to the extent that debt would have been repaid in the absence of the
relief operation. Also, one has to take into account that the budgetary gains from debt relief only
gradually become available, at the pace of the contractual debt service obligations cancelled.
This could mean that budgetary gains are spread out over many years or even decades to come,
making the nominal value of debt relief a highly imperfect measure of the fiscal benefit to the
recipient country (see section 2.2.2.2 on the net present value (NPV) and economic value of
debt relief). Another point of caution is that debt relief operations may well crowd out other aid
interventions. Debt relief is not necessarily additional to everything else the donor community
is doing. As donors typically target a certain level of Official Development Assistance (ODA),
they could be expected to compensate the debt relief granted (which can be partly accounted for
as ODA) by lowering other aid expenses. Such trade-offs may happen on the level of individual
debt relief-receiving countries or between those countries that receive debt relief and those that
do not (see section 2.4 on aid, debt relief and the accompanying ODA-accounting rules).
Engaging in policy dialogue and making the awarding of debt relief conditional (ex post) on
measures of policy quality and institutional reform, is deemed to improve country governance.
The extent to which these inputs of debt relief expenditures and policy dialogue materialise into
outputs determines the degree of efficiency of the intervention.
Second, the more recent generation of debt relief interventions furthermore explicitly aims to
achieve three particular outcomes: regaining durable debt sustainability, eliminating debt
overhang, and increasing the amount (and quality) of pro-poor spending. The extent to which
inputs via outputs materialise into this set of outcomes, determines the degree of effectiveness
of the intervention.
Third, the aforementioned outcomes should result into a higher economic growth rate, and
directly, or indirectly, lead to a reduction of poverty, or more broadly speaking, the
achievement of a set of internationally-agreed development targets such as the MDGs.
It is important to note that those parties that are designing and granting the debt relief
intervention, i.e. official creditors, or also the ones who provide development aid
(‘donors’). In fact, official debt relief is nothing else but an alternative aid modality. This is
also explicitly acknowledged as some types of debt relief interventions can be accounted
for as official development assistance (ODA) 3 . As such, it is important to assess the (dis)
similarities of (different types of) debt relief interventions with other more traditional aid
modalities (project aid, budget support), and to assess to what extent debt relief is coherent
with the overall aid policy, both at the international as well as the individual donor level.
More specifically, at the international level, it is important to assess to what extent debt
relief is coherent with the principles of the so-called ‘new aid approach’ (NAA), as e.g.
materialised in the 2005 Paris Declaration.
3 This implies that the specific rules that guide the ODA-accounting of debt relief can enter as an important
element in the assessment framework, reason for which we describe this in the preconditions.
Coming to Terms with Reality
This general assessment at the international level establishes the reference framework to
assess debt relief policies at the individual donor level, by looking at the Belgian case. As
is highlighted in the second vertical logical framework chain, and after specifying the
particular Belgian institutional context, and historical creditor exposure, it reviews the
Belgian practice in participating in the construction of the international concerted debt
relief policy, as well as the extent to which it has dealt with available policy space in an
efficient as well as effective way. In doing so, it reviews the Belgian inputs, in terms of the
amounts of debt relief granted, as well as the modalities attached.
Fourth and finally, at the level of coherence, it assesses to what extent Belgium, in
executing a debt relief policy, has adhered to the principles of the NAA, and, at the
domestic level, to what extent the Belgian debt relief policy is coherent with the overall
Belgian aid strategy, so that it can be defended to include it as a development intervention,
and expenditures can be accounted for as ODA.
As highlighted in the third column, the evaluation applies the same intervention logic to a
particular recipient country, namely Cameroon. Although this is not a partner country of
the Belgian development cooperation, it fits a number of other criteria: it is a HIPC
country, having gone through the full cycle of different ‘generations’ of debt relief
interventions, including HIPC/MDRI, which means that an ex-post evaluation can be
executed. Moreover, the Belgian exposure to Cameroon was considerable, not so much in
terms of bilateral loans, but mainly in terms of export credit claims, held by the Belgian
ECA ONDD. The analysis of the Cameroon case can provide some elements to judge to
what extent it is defendable, from a development perspective, to use aid to partly
compensate ONDD for the debt relief granted.
Also, it is important to note that country case studies for two countries that match with
other criteria, the Democratic Republic of Congo (DRC) and Nigeria, are the subject of
two follow-up evaluation jointly commanded by the Belgian and Dutch evaluation
services 4 .
Annex 1 provides a brief overview of the different stages of the evaluation and the
information collection process, including a list of key informants interviewed during the
evaluation.
4 DRC is the logical suspect being the most important partner country of the Belgian development
cooperation, as well as being a HIPC, but without the HIPC-initiative being currently fully completed.
Nigeria is a good case of more ad-hoc global debt relief interventions outside the HIPC context.
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