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

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| 136 | Annexes debt relief in a particular recipient country. The field mission was executed by two members of the team (Lode Berlage and François-Xavier de Mevius) in December 2009. The list of contacted people is added in the country mission report (Annex 4.1). In order to be able to finish the evaluation, a third stage of the evaluation planned for a detailed historical reconstruction, for one particular country, namely Cameroon, of the evolution of the claims of ONDD, from the original exposure through a series of rescheduling agreements, up to the final (exit) debt relief operation for that country, and the elaboration of the compensation claim by ONDD to DGDC. This last stage could start at the end of May 2010, and involved as series of work meetings with ONDD staff in Brussels (mainly with Mr. Anton De Doncker) to jointly reconstruct and analyse the particular case. This stage could be finished at the end of August 2010. Jointly with the execution of the third stage, the team then conducted a final update on the work done under two other stages, in order to be able to produce a draft final report of the evaluation at the end of August 2010. In order to do this, the team engaged in a series of final update meetings with key Belgian informants, including Lutgarde De Greef (DGDC) and Erwin de Wandel (Policy Cell Minister of DC), Eddy Boelens (Ministry of Finance). The draft final report was then discussed with the evaluation steering group on September 13, 2010. Coming to Terms with Reality Annex 2.1: Paris Club terms of treatment Table 1: Paris Club Rescheduling Terms 1988 1990 1991 1994 1996 1999 Toronto Houston London Naples Terms Lyons Terms Cologne Terms** Terms Terms* Terms Flow Flow Flow Flow Stock Flow Stock Flow Stock Approach Concessional (ODA) debt Approach Approach Approach Approach Approach Approach Approach Approach cancellation % 0% 0% 0% 0% 0% 0% 0% 0% 0% reschedule % 100% 100% 100% 100% 100% 100% 100% 100% 100% maturity (years) 25 20 30 40 40 40 40 40 40 grace (years) 14 up to 10 12 16 16 16 16 16 16 interest rates less than less than less than less than less than less than less than less than less than or equal or equal or equal or equal or equal or equal or equal or equal or equal to original to original to original to original to original to original to original to original to original rate rate rate rate rate rate rate rate rate Non-concessional (non-ODA) debt Debt Reduction (Option A) cancellation % 33% na 50% 67% 67% 80% 80% 90%*** 90%*** reschedule % 67% 50% 33% 33% 20% 20% 10% 10% maturity (years) 14 23 23 23 23 23 23 23 grace (years) 8 6 6 6 6 6 6 6 interest rates market market market market market market market market Debt Reduction (Option B) rate rate rate rate rate rate rate rate cancellation % 0% 0% 0% 0% 0% 0% 0% 0% 0% reschedule % 100% 100% 100% 100% 100% 100% 100% 100% 100% maturity (years) 14 up to 15 23 33 33 40 40 125 125 grace (years) 8 up to 8 0 0 3 8 8 65 65 interest rates reduced market reduced reduced reduced reduced reduced reduced reduced rate rate rate rate rate rate rate rate rate Previously refinanced debt Top up to Top up to achieve 67% Top up to achieve 80% Top up to achieve 90% 50% PV relief PV relief PV relief PV relief Debt Conversion Option ODA debt no limit no limit no limit no limit no limit non-ODA debt 30% or 10% or 20% or SDR 30m 30% or SDR 40m 30% or SDR 40m SDR 40m US$ 10m na = not applicable * Applies to lower middle income countries, with per capital income > $785 and < $3,125 ** Cologne Terms are the benchmark terms: some countries may receive less and others more depending on the relief needed to reach sustainability. *** Countries which cannot cancel debt can reschedule the part of the debt that would be cancelled with low interest rates (0.0001%) and a single bullet maturity of between 6 and 350 years, with maturity depending on the appropriate market interest rates. Sources: Debt Relief International, World Bank, IMF Source: Villanova and Martin (2001) | 137 |
| 138 | Annexes Annex 2.2: A note on the DAC rules on the treatment of donor interventions on debt reorganisation in ODA statistics This note provides a short overview on the DAC-rules regarding treatment of debt reorganisation and debt relief interventions by (bilateral) donors in the ODA statistics. Under specific circumstances, debt reorganisation operations, including debt relief, on both ODA as well as non-ODA loans can be accounted for as (additional) ODA. Within the overall framework of rules and guidelines to account for aid transactions, DAC donors have also agreed on a taxonomy of debt reorganisation interventions, and a set of rules and guidelines to account for these operations. The basic reference to the current practice is the ‘Handbook for Reporting Debt Reorganisation on the DAC Questionnaire’ (DCD/DAC(2000)16). On the basis of these accounting guidelines, and the resulting entries in the DAC reporting system, statistics regarding the use of Debt reorganisation in total aid are compiled by the DAC secretariat, and detailed entries regarding these interventions are available in the on-line CRS system. In this treatment, we will restrict our discussion to the treatment of disbursements. This reporting in principle entails several entries for each operation, requiring detailed information according to three basic criteria: • the type of reorganisation (referring to a taxonomy of possible types); • the nature of the debt prior to reorganisation (in DAC jargon, the ‘sector’), indicating whether the old loan was originally accounted for as ODA (because of its concessional nature and its development purpose), or not (non-ODA). More precisely, DAC accounting distinguishes between three sectors: ODA, OOF (other official finance), or Private; • the breakdown of the amount of debt reorganisation into principal and interest. Note again that conventional DAC aid accounting relies on the ‘net’ (flow) principle. For loans that meet the criteria to be included as ODA, loan disbursements are added to ODA, while loan principal repayments are accounted for as negative entries, making a loan entry sum to zero over the entire lifetime of the loan (provided, of course, it is fully repaid). 1.A taxonomy of debt reorganisation interventions considered by DAC rules The DAC Handbook of Debt Reorganisation (DCD/DAC(2000)16) distinguishes between at least six types of interventions: • Debt cancellation. Debt cancellation refers to an agreement between the debtor and the creditor that an outstanding debt no longer needs to be repaid. It can refer to both ODA debt as well as non-ODA debt, with differences in treatment between the two cases. • Debt Rescheduling. In very general terms, it refers to any action which results in a new schedule of maturities of either principal or interest, or both, for outstanding debt. Also interest due and in arrears may be rescheduled in the form of a new loan, with the old Coming to Terms with Reality loan to run in parallel. Such a rescheduling may be concessional (i.e. incorporating an element of debt relief), or non-concessional. Most operations refer to a rescheduling within the Paris Club framework, but also operations occurring outside a Paris Club agreement are eligible, albeit according to different rules. It can refer to both ODA debt, as well as non-ODA debt 87 . These different possibilities are treated according to different guidelines, with potentially differential ODA-effects. • Debt conversion. These operations, also labelled debt swaps, refer to an exchange of debt for equity, or counterpart domestic currency funds to be used to finance particular projects or policies. Such a conversion may or may not be executed at a (sometimes substantial) discount. • Service payments to third parties. This occurs when a donor pays debt service to a third party creditor, usually a multilateral or private sector body, on behalf of the debtor country. • Debt buybacks. This refers to actions whereby a donor provides a grant to fund the recipient country’s repurchase of all or part of its external debt from a third party (or buys back the debt directly on behalf of the recipient), usually at a discount 88 . • Contributions to the HIPC Initiative (Trust Fund). Refers to grants paid by the donor into the IDA-managed Heavily Indebted Poor Countries (HIPC) Initiative Trust Fund, to finance the share in total HIPC debt relief of creditors that are unable to finance this out of their own resources. Note that most, but not necessarily all, of these donor actions classified under the debt reorganisation heading include an element of debt relief (as measured in NPV) for the recipient country. To give one counterexample, a non-concessional rescheduling, e.g. capitalising interest at market rates, does not entail an element of debt relief. So far, the DAC rules are fairly comprehensive in treating all possible donor interventions related to debt relief and other debt reorganisations, except for the recently decision to compensate multilaterals such as IDA, or the African Development Fund, for the debt relief which they granted within the framework of the recent Multilateral Debt Relief Initiative (MDRI), through additional contributions to these multilaterals (tbc). 2.A detailed overview of accounting entries on debt reorganisation covering both gross and net ODA Table 1 provides an overview of the respective current treatment in DAC-statistics of these different types of interventions, as guided basically by DCD/DAC(2000)16). This overview uses a slightly different structure, taking into account the basic difference between operations on ODA and non-ODA debt. Finally, the overview deals with some additional operations, such as buybacks, or (debt) service payments and other contributions to third parties. 87 Such as the Paris Club Debt Service Reduction (DSR), Debt Reduction (DR) or Capitalisation of Moratorium Interest (CMI) rescheduling options for non-ODA debt. 88 Such as in the case of grants paid into the IDA Debt Reduction Facility, to finance the buyback by recipient countries of their private debt. | 139 |
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Page 115: Published by: Kingdom of Belgium Fe
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