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

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International debt relief initiatives and their effects
One important question now remains. How will all the international debt relief initiatives
described impact the debt stock of the recipient countries in question? Figure 2.2 presents the
latest projections by the World Bank and IMF on the evolution of the debt stock of the current
post-decision point HIPCs. As a result of debt relief under traditional (mostly Paris Club)
mechanisms, the HIPC Initiative, additional HIPC+ relief by bilateral creditors and the MDRI,
the aggregated debt burden of these 35 countries is expected to be reduced by 113.7 billion US$.
This would signify an 82.6 % reduction relative to their pre-decision point level of debt stock.
Figure 2.2 The debt stock of the 35 post-decision point HIPCs under different debt relief
stages (in bn US$, in end-2008 PV terms)
150
120
90
60
30
0
48.5
89.2
Before traditional
debt relief
Source: IDA and IMF (2009)
38.8
75.6
After traditional
debt relief
9 Interim Countries
26 Completion-Point Countries
20.2
36.8
After HIPC Initiative After additional
Debt Relief bilateral debt relief
2.4 Aid, debt relief and ODA accounting
After MDRI
Building further on the analysis developed in section 2.3, this section engages with the
question to what extent debt relief (and other debt reorganisation) translates into Official
Development Aid (ODA), as formulated by OECD-DAC, and how this relates to measures
that try to capture the economic value of debt relieved.
2.4.1 ODA accounting rules and the resulting debt relief component of ODA
Evidently, there is no perfect equivalence between the amounts of debt relief given by a
creditor and the amount of additional ODA this creditor can ‘bring in’ for the relief
operation. For example, to avoid double counting, creditors forgiving debt titles that
already previously qualified as ODA (at the time they were provided to the recipient) may
only register the forgiven interest due and in arrears as new ODA. The amortisation part of
20.2
31.5
16.9
7.1
Coming to Terms with Reality
the debt forgiven does enter the net ODA statistics, but in a disguised way, more
specifically in future years under the form of repayments (which are normally deducted
from gross ODA figures when they occur) that do not longer take place. This disguised
effect, of course, only materialises provided that the ODA debt would have been repaid in
the absence of the relief operation. The situation changes if debt relief concerns non-ODA
debt. For an in-depth description of ODA accounting rules for debt reorganisation we refer
to Annex 2.2; we return to these rules in the next section 2.4.2 where we assess to what
extent the declared ODA from debt relief matches with an economic value concept. The
remainder of this section looks into the actual amounts of ODA generated by debt
rescheduling interventions and how this compares to total ODA figures.
Table 2.10 shows the breakdown of bilateral debt reorganisation operations into the different
categories applied by the DAC for periods 1988-1995, 1996-1999 and 2000-2008. Clearly,
most of the 129.3 billion US$ gross debt relief reported 36 comes from debt forgiveness grants
related to the cancellation of ODA and non-ODA claims and only a very minor part from
service payments to third parties, debt conversions, debt buybacks and the like (so-called
‘other actions on debt’). Taking into consideration the offsetting entries for debt forgiveness
(that correct for the amortisation part of ODA debt, see Annex 2.2), net bilateral (ODA) debt
relief amounts to 111.4 billion US$ for 1988-2008 (about 14% lower than the gross figure)
or 7.03% of total ODA recorded in that period. Another source of ODA is debt reorganisation
through concessional rescheduling, which together with gross debt relief constitutes 148.7
billion US$ worth of gross bilateral (ODA) debt reorganisation. Again, one has to correct for
offsetting entries to compute the net concept; net bilateral (ODA) debt reorganisation has
been 130.8 billion US$ or 8.26% of total 1988-2008 ODA statistics.
36 Note that this amount differs from the earlier-mentioned US$ 115.3 billion because of small differences in
concept and definition between the different tables of the DAC’s CRS database.
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