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

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Debt relief policy and practice by Belgium
ONDD also ensures political risks linked to foreign direct investment. It concentrates its
activities on non-OECD countries. The ONDD itself does not give loans to states or public
institutions. But as stated in the introduction it becomes a creditor if the debtor fails to
service his debt and the ONDD has to compensate the original creditor. The original
creditor keeps a claim on the debtor equal to the franchise, i.e. the non-compensated
fraction of his claim. It should also be mentioned that in principle the ONDD implements
transactions for its own account. As such, here, it acts purely from the perspective of a
private commercial insurer. However if the risks of a transaction are deemed too big, the
ONDD can provide a credit insurance on account of the Belgian State. Thus the ONDD
has two systems of accounts, one for its own operations and one for the operations on
account of the State. These loans are at non-concessional terms, and do not constitute
ODA; in DAC terms, they are so-called ‘other official flows’ (OOF).
The DGD is, in principle, not involved in arrangements for solving sovereign debt
problems. But DGD can decide to engage itself in interventions related to debt relief in an
autonomous way, using its resources e.g. to buy up debt from a third party and engage in
debt swaps, or decide to support international debt relief initiatives in another way; in fact,
as we will see later, (most) contributions to international financial institutions in the
framework of debt relief initiatives are charged to the development cooperation budget.
Furthermore, the Belgian State has decided that creditors of sovereign debt, i.e. the
Ministry of Finance and the ONDD, be (partly) compensated for the debt relief they
provide, from DGD’s budget. We discuss this in some detail in subsection 3.1.3.
Apart from those three major players, also the Ministry (presently Federal Public Service)
for Foreign Affairs, Foreign Trade and Development Cooperation, as well as the Belgian
Central Bank (NBB-BNB) are marginally involved in debt relief issues. 52 The first
compensation arrangement, to be discussed in the following subsection, also involved the
then-Ministry of Foreign Trade; for a discussion of its (limited) role we refer to the
following subsection. Finally, the Belgian central bank enters as a marginal creditor, as it
operates a small credit line window, on which it also provided some debt relief;
furthermore, it is involved in issues related to the role of the IMF in international debt
relief initiatives.
We will discuss the Belgian institutional set up in more detail in the following section. We
will structure this discussion using a taxonomy of debt relief interventions done by
Belgium; as already indicated in chapter 1, this taxonomy clearly mirrors the list of
international debt relief interventions. A graphical overview of these different types of debt
relief interventions is also presented as figure 3.1.
52 Also FINEXPO (Committee) is to some extent involved. FINEXPO aims at providing advice and financial
assistance to Belgian companies to export capital goods and services. The provision of bilateral
state-to-state loans is one of their instruments. See SEE (2010) for a recently concluded evaluation of
FINEXPO for the Special Evaluation Office.
Coming to Terms with Reality
Figure 3.1 The Belgian institutional debt relief structure and types of interventions
Belgium
International Organisations
Recipient Countries
DGDC
MDRI
MDRI
IMF
MDRI
MDRI
HIPC Trust Fund
Worldbank IDA
HIPC
HIPC’s
HIPC Trust
Source: Authors’ own elaboration
Financing the
clearance of arrears
Clearance
of arrears
Regional
development
institutions
HIPC/
MDRI
Compensation of
ONDD PC debt relief
CL MDRI 1991
HIPC
2001, 2005
ONDD
Non-ODA
loans
Other
low-income
countries
Compensation of
MINFIN PC debt relief
Paris Club
Buyback
for Swaps
ODA loans
Debt swaps
HIPC
Comp.
MINFIN
Other
lower-middleincome
countries
Autonomous and induced
debt swaps
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