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

| 144 |
Annexes
related to specific debt relief initiatives. Finally, the bilateral loan section, apart from the
offsetting entries part, also includes debt reorganisation interventions related to gross new
ODA loans from ‘rescheduled debt’, referring to either the accounting of capitalized interest
on ODA debt, or the rescheduling of OOF as ODA (rare). Note however, that this new ODA
loans from rescheduling do not include an element of debt relief, strictly speaking.
Table 2 provides an overview of actual ODA-impact of debt reorganisation for the 1988-
2008 period, according to the most comprehensive definition of debt reorganisation interventions.
It refers to ODA disbursements from bilateral donors to developing countries. The item
‘Gross Debt Reorganisation’ sums debt forgiveness grants and other action on debt. Adding
the new ODA loan from rescheduling part (which is not debt relief) summarizes to the item
‘Gross bilateral ODA debt relief’. Taking into account the offsetting items from ODA
principal reduction, the ‘net bilateral ODA debt relief’ is derived 92 .
The table also provides an estimate of the share of bilateral debt reorganisation ODA as a
share of total (net) ODA, both for the debt relief part in a strict sense, as for the more
comprehensive debt reorganisation concept.
3. Additional entries when using a net transfer concept
of ODA
While conventional ODA accounting uses a net (flow) concept, it may sometimes be more
appropriate to use a net transfer concept of aid accounting, deducting from net flows the
interest payment on ODA loans. Memo items included in ODA statistics, registered under
the item interest received allow for this transformation. In this case however, one also has
to account for interest forgiven. The DAC debt reorganisation rules also include guidelines
on how to account for forgiven interest, using offsetting entries similar to those used for
principal reduction embedded in ODA debt cancellation.
More precisely, the rules apply to an intervention related to the interest part of a cancellation of
ODA or OOF debt, or a ODA or OOF debt conversion involving conversion of interest. In
both cases, two entries equivalent to the lump sum amount of forgiven interest or converted are
made: one (referring to table DAC 2a) as interest received (on the relevant country line), and
one (as a memo item) made in table DAC 1 under ‘offsetting entries for forgiven interest’.
92 Data for this table are drawn from the DAC CRS on line system. The table is identical to the most
comprehensive published statistics on debt reorganisation in ODA compiled by the DAC secretariat, such
as DAC (2007, table 34), except for bilateral HIPC trust fund contributions (and in principle also for
unearmarked IDA DRF trust fund contributions) which are registered as a memo item jointly with
multilateral contributions, and which can not be singled out in the CRS system. Somewhat strangely, the
DAC secretariat itself relies on data from the World Bank to add these bilateral HIPC trust fund contributions
to derive their published comprehensive debt reorganisation statistics.
Coming to Terms with Reality
4. Consequences and limitations for empirical research
using ODA debt relief data
As the previous discussion made clear, the most comprehensive (gross) measure of the debt
reorganisation part in bilateral ODA refers to the sum of debt forgiveness grants, other action
on debt (including, if available, bilateral donor HIPC trust fund and unearmarked IDA DRF
trust fund contributions) and the new ODA loans from rescheduled debt. However, if we
want to measure ODA related to debt relief in a more strict (NPV) sense, gross ODA debt
relief is best proxied by the sum of debt forgiveness grants and other action on debt only 93 .
Net ODA debt relief is the former one minus offsetting entries on debt relief.
In principle, cleaning total (bilateral) ODA for these debt relief interventions can then be
done accordingly, by subtracting all the items above from total (bilateral) ODA figures.
Again, it is preferable not to clean net ODA (new loans from) rescheduled debt part, as it
does not entail debt relief in a strict (NPV) sense.
In case one uses the net transfer concept of aid, net ODA has to be reduced by the interest
payments received on ODA loans; in this case on has to take into account that these
interest payments include interest forgiven (as an offsetting item), so when cleaning
correctly for the debt relief part in ODA, total interest payments received have to be
reduced by this ‘interest forgiven’ part.
Now that we have conceptualized everything, what is the level of disaggregation of data
publicly available for empirical analysis here, as in the on-line CRS database. For this, we
should make a distinction between data entries registered in table 1 of the DAC system
(and CRS), and entries in table 2 of the CRS on-line database (where table 2a refers to
ODA). This is relevant since only entries related to table 2a are also available at the
disaggregated recipient country level, allowing for analysis using pair-wise individual
donor-recipient data (tbc further). All data entries in both table 1 and 2a are available for
all (bilateral) donors together, and for each donor individually, though.
The last column of table 1 indicates which data entries are available in table 1, and/or table
2a. However, the bottom-line seems to be that some entries related to debt relief or other
debt reorganisation interventions are only registered as table 1 entries, and are as such not
available for pair-wise empirical analysis. More particularly, this goes for all the entries
under the heading of ‘other action on debt’ (conversions, buybacks, third party debt service
and other contributions), which are not registered as an separately identifiable entry in
table 2a. This also goes for (the offsetting entry on) forgiven interest.
As a consequence, when doing such disaggregated pair-wise donor-recipient analysis, it is
not possible to single out comprehensive debt relief, according to our definition, lacking
grosso modo all interventions related to other action on debt (including HIPC and IDA
DRF trust fund, and in future also MDRI-related contributions).
93 Including again, if available separately, bilateral donor HIPC trust fund and unearmarked IDA DRF trust
fund contributions.
| 145 |