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

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Case study Cameroon
take into account compensations that were already made by DGD in the meantime, in
execution of the 1991 compensation agreement. Finally, in section 4.2.2, we briefly introduce
the Belgian-Cameroon Development Fund.
4.2.1 The ONDD behaviour in Paris Club consolidations for Cameroon
Between 1989 and 2001, Cameroon and its external creditors agreed on six debt
consolidations in the framework of the Paris Club. The first two agreements provided a
rescheduling of the country’s debt service. But from the third agreement (March 1994)
onwards, creditors could opt for debt relief in the form of reduction of the principal or the
interest rate. The sixth agreement was consecutive upon the country reaching its HIPC
Decision Point. Table 4.4 provides a brief account of how ONDD applied the six debt
rescheduling/ debt relief Paris Club agreements on Cameroon’s external debt up to and
including the agreement after the country was given Decision Point status. The cut-off date
for all agreements was December 1988. Debts contracted afterwards were not included in the
successive debt rescheduling agreements. The table shows two prominent features of the
ONDD stance on debt rescheduling/relief. First the ONDD opted as long as possible for
simple rescheduling, rather than for debt relief 84 . Only when the fifth Paris Club agreement
(October 1997) made mandatory a debt reduction of 50% in present value terms did the
ONDD change its stance and start opting for interest rate reductions. But Belgium was not
the only Paris Club member postponing debt relief as long as possible. Other countries, e.g.
Germany, the Netherlands, the United Kingdom and the United States delayed the granting of
debt alleviation until it became mandatory in the fifth Paris Club agreement. Other countries
opted for debt relief when it was included as an option in the third agreement. Canada and
France e.g. opted for a cancellation of the principle by 50%, whereas Austria, Denmark,
Spain, Italy and Switzerland started reducing the interest rates on rescheduled debt.
84 As noted earlier, the ONDD claims that the choice for the rescheduling option, and for the debt service relief
option (instead of the debt stock relief option later) was due to the fact that it did not get approval from the
Belgian government to go for another option.
Table 4.3 Belgian participation in debt consolidations in the framework of the Paris Club
ONDD terms
Amount treated
by ONDD
(in mio EUR)
Paris Club terms for (non-ODA) claims
on Cameroon
Total amount treated
in Paris Club
(in mio US$)
Coming to Terms with Reality
Date of decision
Paris Club
b) Date of agreement
Belgium-Cameroon
Rescheduling (at market rate) of future debt service
payments due on original claims over 1996-1999; and
of arrears over 1994-1997
I a) May 24, 1989
18.4
Classic terms
Rescheduling at market rate over 10 years including 5 year
grace
Houston terms
Rescheduling at market rate over 15 years including 8 year
grace
535
b) Nov 22, 1991
Rescheduling (at market rate) of future debt service
payments due on original claims and debt service
payments due on consolidation I over 2000-2007; and of
arrears and penalty interests over 1998-2006
a) Jan 23, 1992
II
42.0
960
b) Sept 17,1992
Rescheduling (at market rate) of future debt service
payments due on original claims and interest payments
due on consolidations I and II over 2009-2019; and of
arrears and penalty interests over 2002-2009
III
Mar 25, 1994
57.4
London terms
Menu of options:
• “debt stock reduction option”: cancelation of 50% of the
claims treated , the outstanding part being rescheduled at
market rate
• “debt service reduction option”: rescheduling at reduced
interest rate
• “debt rescheduling (or commercial) option”: rescheduling
at market rate over a longer period
1,258
Jan 27, 1995
Rescheduling (at market rate) of future debt service
payments due on original claims and debt service
payments due on consolidation I and II over
2012-2021; and of interest payments due on
consolidation III, arrears and penalty interests over
1999-2011 (in progressive installments)
IV
Nov 16, 1995
38.0
Naples 50% terms
Menu of options:
• “debt stock reduction option”: cancelation of 50% of the
claims treated , the outstanding part being rescheduled at
market rate
• “debt service reduction option”: rescheduling at reduced
interest rate
• “debt rescheduling (or commercial) option”: rescheduling
at market rate over a longer period
1,348
Apr 23, 1997
50% reduction of NPV (on most of the debts involved)
by interest rate reduction combined with rescheduling
of repayments over 1999-2022 (in progressive
installments); and by rescheduling of repayments over
2000-2004
V
45.0
Naples 50% terms
Menu of options to achieve a 50% reduction of NPV:
• “debt stock reduction option”: cancelation of 50% of the
claims treated , the outstanding part being rescheduled at
market rate
• “debt service reduction option”: rescheduling at reduced
interest rate
October 24, 1997
1,270
Jun 17, 1998
34%-90% reduction of NPV by interest rate reduction
combined with rescheduling of repayments over the
period 2002-2035 (in progressive installments); by
rescheduling of repayments over the period 2008-2025
(in progressive installments); and by interest rate
cancellation combined with rescheduling of
repayments to 2124 (single bullet repayment)
Jan 24, 2001
VI
77.0
Cologne terms
Menu of options to achieve up to 90% reduction of NPV:
• “debt stock reduction option”: cancelation of up to 90%
of the claims treated , the outstanding part being
rescheduled at market rate
• “debt service reduction option”: rescheduling at reduced
interest rate
1,300
17.1
23.2
Sept 17, 2002
Amendments
Nov 19, 2004
Feb 16, 2006
Source: ONDD, Paris Club
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