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

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Case study Cameroon
The second feature of the ONDD stance is a progressive lengthening of the repayment
period. This went from a five year grace period combined with a four years repayment
period in the first agreement (1989) to a grace period of ten years combined with a ten
years repayment period for certain debts under the fifth agreement. Moreover in order to
reach the agreed debt reduction in (N)PV terms, repayments were made progressive over
time.
Table 4.4 also shows that in order to reach a debt reduction of 67% in net present value terms
in the sixth agreement (2001) the repayment periods became even longer and for some of the
debts 90% of the principle was to be repaid in one bullet payment in the year 2124.
After Cameroon was given Completion Point status in April 2006, the Paris Club decided
on complete cancellation of debt resulting from the second and third rescheduling and on
substantial reduction of the other debt resulting from loans originally contracted before the
cut-off date. In application of the Paris Club agreement, the ONDD agreed to cancel the
outstanding debt resulting from rescheduling agreement two to six (the debt claims
resulting from the first agreement had been paid or rescheduled). Article three of the
bilateral agreement states explicitly:
« L’ONDD confirme que la République [du Cameroun] n’a plus aucune obligation de
paiement à son égard en vertu des conventions bilatérales [deux à six] »
As can be seen in table 4.5, the total amount of debt involved was 216.9 million EUR,
including interim interest from the date of the bilateral agreement. If we exclude the latter,
the total amount of debt and interest cancellation was 215.9 million EUR. Out of this 67.6
million EUR were claims originating on ONDD’s own account and 124.1 million EUR
were claims on the State account. The remainder consisted of remaining claims of the
original insurance takers or of reinsurers.
Table 4.4 Remaining claims cancelled at HIPC Completion Point (in mio EUR)
Principal Capitalised interest Interim interest Total
Total 92.3 123.7 1.0 216.9
o/w for account of ONDD 26.9 40.5 0.3 67.6
o/w for the State account 59.5 64.0 0.6 124.1
Source: ONDD
Table 4.5 also shows that more than half of the debts cancelled consisted of accumulated
interest. The difference between accumulated interests and principal was especially high
for the claims on the ONDD’s own account.
In order to calculate the compensation claim, two adjustments have to be made. First, in
the discussions preceding the decisions of the Council of Ministers it had been agreed that
the compensation to be paid to the ONDD would be on the basis of the ‘economic value’
of the debts, calculated on the basis of an ONDD model applied to the situation ‘in
Coming to Terms with Reality
tempore non suspecto’ (i.e. at the end of 1999). For Cameroon the application of the
formula resulted in an economic value of 46% of the nominal value. Second, rescheduled
debts for which Development Cooperation had already paid compensation would not be
eligible for a new compensation. Table 4.6 shows the list of previous operations, in
execution of the 1991 agreement. As shown, six operations have been realised in this
context. The first operation (March 1996) was the purchase of a claim, under the swap
window, of approximately 439.4 million BEF (10.9 million EUR) at 33% of its nominal
value. As such, DGD paid around 145 million BEF or 3.6 million EUR. The remaining five
operations were (partial) compensations of Paris Club debt relief by the ONDD.
Table 4.5 Past compensations (in mio EUR)
Date Nature of operation Amount of claim/debt
cancellation
Purchase price
Mar 6, 1996 Purchase of claim on government
account (swap)
10.9 3.6
Dec 13, 2000 Participation in Paris Club debt relief 8.1 4.1
Aug 2, 2001 Participation in Paris Club debt relief 6.1 3.1
Jan 24, 2001 Participation in Paris Club debt relief 5.5 2.7
Nov 14, 2002 Participation in Paris Club debt relief 9.9 5.0
Nov 14, 2002 Participation in Paris Club debt relief 8.5 4.2
Total 49.1 22.7
of which: Participation in
Paris Club debt relief
38.2 19.1
Source: ONDD
Taking into account these operations, table 4.7 presents the final claim. It takes into
account previous compensations by subtracting it from the nominal value of the claim;
finally the remaining amount is multiplied by the so-called economic value of the claim,
which comes from the internal scoring model of ONDD, to arrive at the combined claim of
70.6 million EUR. 85
Table 4.6 Calculation of final ONDD claim for Cameroon (in mio EUR)
Nominal
value
Debt compensated in
previous operations
Basis for calculation
of claim
Own account 67.6 - 67.6 31.1
State Account
Source: ONDD
124.1 38.2 85.9 39.5
Claim (46% of
previous column)
It was also attempted to calculate the effect of separating the two (2001 and 2005)
agreements, into the debt relief which would result from a strict application of the HIPC
Cologne terms of debt relief (i.e. a 90% cancellation in NPV), as agreed upon in the 2001
agreement, and the remaining debt relief resulting from the decision to move instead to
85 This claim remains unsettled as of today.
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