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

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Case study Cameroon
Table 4.2 Average annual growth rate, global and by per sector of activity (in percentages)
1994-2000 2000-2006
Global 4.5% 3.7%
Agriculture 7.0% 3.8%
Industry 4.7% 2.9%
Services 0.7% 6.9%
Source: World Development Indicators (2008)
As to economic growth, there was no growth acceleration between the six years up to the
year 2000 and the six subsequent years. Between 1994 en 2000 GDP increased with an
annual average of 4.5%. Between 2000 and 2006 the annual average growth rate was
3.7%. The growth acceleration is observed in agriculture. But in relative terms it was
strongest in industry (including extractive industry). Only value added by services
increased faster in the second than in the first period. It is not evident what explains the
growth deceleration in a period of debt relief and increasing oil export revenue. If the debt
relief and the prospect of even deeper cancellation had a positive impact on growth, this
impact must have been limited and swamped by the negative impact of other determinants
of growth.
Secondly we discuss the evolution of poverty. In Cameroon, as in most countries, direct
data on poverty are available only for a few years. For Cameroon we have data on income
poverty for the years 1996, 2001 and 2007. Between 2001 and 2007 the percentage of
households with an average income below the poverty line was almost stable, at a level of
approximately 40% of the population. In urban areas the percentage of poor people in the
population decreased, but in rural areas it increased. We can compare this evolution with
that between 1996 and 2001. The statistics show a strong decrease in the percentage of
households below the poverty line between those two years. Analogous to our statement on
the impact of the HIPC debt alleviation on economic growth, we conclude that, if debt
alleviation had a positive impact on poverty reduction, this impact must have been weak
and swamped by that of other determinants of poverty.
In addition to direct data on income poverty, we can consider also indirect indicators. In
recent years we observe a slight decrease of infant and child mortality and a stabilisation of
life expectancy. Infant and child mortality had been on the increase in the 1990s and life
expectancy had been falling. The favourable evolution after the year 2000 was possibly
affected by the conditions on the allocation of public expenditures for health which were
part of the list of conditions to reach the Completion Point under the HIPC Initiative.
Furthermore after the year 2000 the rate of participation in education and adult literacy
kept increasing. This was the continuation of an existing trend. It is not clear to what extent
the process of debt relief contributed to the observed increases.
Summarising we can state that the data available at the end of 2008, when the research for
the case study of Cameroon was undertaken, do not allow us to state that HIPC debt relief
has had a positive impact on economic growth or on the income poverty rate. It may have
contributed to a positive evolution in the health sector. As stated at the beginning of this
Coming to Terms with Reality
subsection, it is possible that the impact of debt alleviation becomes active with a time lag
and that data for subsequent years will show a positive impact on economic welfare.
4.1.7 Coherence
We only consider the coherence of the policies on debt relief and on development
assistance. All data we use are in US$ at constant 2008 prices. We compare data on ODA
for the years 1993-2000, when debt alleviation for Cameroon remained limited (annual
average of less than 100 million US$) with data for the years 2001-2008, the period of
massive debt alleviation (annual average of almost 700 million US$, with considerably
higher figures for the years 2006-2007). Annual average ODA, excluding debt alleviation,
decreased from 410 million US$ in 1993-2000 to 234 million US$ in 2001-2008. The
averages suggest that debt alleviation was associated with a decrease of official
development assistance. But this statement should be qualified. First the yearly data on
ODA, excluding debt alleviation, suggest a decreasing trend between 1993 and 2000. In
the second period, after 2002, we observe a decrease of ODA, but in 2006-2008 it rose to a
higher level. Secondly the decrease of ODA, excluding debt alleviation, is only observed
for ODA loans and not for grants. Net ODA loans were negative in all years after 2001.
This means that repayments exceeded new ODA loans. Grants, excluding debt relief,
increased from an annual average of 281 million US$ over the years 1993-2000 to 310
million US$ over the period 2001-2008. That ODA loans decreased in a period of debt
alleviation is not unexpected. Indeed it would not be consistent to give debt relief with one
hand, while creating new debt with the other. The increase of grants to Cameroon over the
years 2001-2008 is remarkable because the second half of this period was characterised by
increasing foreign exchange receipts and public revenue from oil exports.
We conclude that, contrary to the first impression, the data suggest that the development
assistance policy of the donors-creditors was not incoherent with HIPC debt relief.
4.2 Analysis of the concrete compensation case on
Cameroon
As already briefly mentioned, as part of the 2001-2005 HIPC compensation agreements,
ONDD introduced a compensation claim to DGD in 2006, as a consequence of the country
reaching completion point status, and signing an exit agreement (Cameroon 7), both in the
Paris club and bilaterally with Belgium. In follow up to decisions taken at EU level, the
country was granted not only HIPC but also additional bilateral debt relief, resulting in a
100% cancellation on its remaining eligible claims 83 . The claim amounts to 70.6 million
EUR, and is left unpaid since. In this section we describe how ONDD applied six
consecutive Paris Club agreements, during the 1989-2001 period, to its claims on
Cameroon. Subsequently we present the amount and composition of the debt cancellation
by the ONDD at exit, and the calculation of the final claim to DGD. In doing so, we also
83 Also MINFIN cancelled its remaining claims, for a total amount of 20.56 million EUR. We do not consider
this further here.
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