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

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Annexes
2.3 Debt rescheduling and alleviation operations.
Cameroon has benefited from almost all debt relief initiatives. Beginning in 1989 the country
conducted six debt rescheduling with its Paris Club creditors. The first two operations were
pure rescheduling of debt; starting with the third operation debt rescheduling was combined
with alleviation. The cut-off date in all agreements was 31 December 1988. The agreements
made it possible to reduce considerably the accumulated arrears.
Table 1 Debt Treatments at Paris Club:
Date Terms of treatment Consolidated amount
(million US$)
Cancellation rate
1 24/05/1989 Classical 535 Rescheduling only
2 23/01/1992 Houston 960 Rescheduling only
3 25/03/1994 London 1,258 50%
4 16/11/1995 Naples 1,348 50%
5 24/10/1997 Naples 1,270 50% to 67%
6 24/01/2001 Cologne 1,300 90%
7 17/06/2006 HIPC Initiative exit 1,829 90-100%
Source: Paris Club data
By classical terms we mean a rescheduling of debt service due without reducing the
principle or the interest rate. A prerequisite was an appropriate programme with the IMF or
the World Bank, showing the need for Paris Club debt relief. However, this first program
with the IMF was suspended in the course of 1989, because of poor programme execution.
The Houston terms were designed for the treatment of the debt of the lower middle-income
countries to which Cameroon was belonging before the devaluation of the franc CFA in
1994. Cameroon obtained a debt rescheduling under these terms in 1992, less than three
years after the first Paris Club agreement.
The London terms (later replaced by the Naples terms) were reserved to highly-indebted
poor countries. Cameroon could benefit from this initiative because it was reclassified as a
low income country following the devaluation of the CFA franc in 1994, which made the
country eligible to IDA assistance. This third agreement was also cancelled soon after its
initiation because the Cameroonian government failed to honour its obligations. A new
agreement with the IMF was signed in 1995 (PRGF – Stand-by Agreement). On the basis
of this agreement Cameroon benefited from another Paris Club debt alleviation based on
the new Naples terms (i.e. 67 per cent reduction in NPV on non concessional debt before
cut-off date).
The fifth agreement with the Paris Club covered debt with maturity between October 1,
1997 and the end of December 2000. It was preceded by an agreement with the IMF under
the Enhanced Structural Adjustment Facility (ESAF). Once more, the Naples terms were
applied.
Coming to Terms with Reality
In October 2000, Cameroon reached the Decision Point of the Enhanced HIPC Initiative.
The Paris Club agreed to provide its share of assistance by rescheduling Cameroon’s debt
on Cologne terms. Finally, Cameroon reached the Completion Point of the HIPC Initiative
in April 2006, which led to a drastic reduction of its pre-cut off point bilateral debt to the
Paris Club members.
In addition, at the Completion Point under the enhanced HIPC Initiative, Cameroon
qualified for additional debt relief from the IMF, IDA and the African Development Fund
(AfDF) under the Multilateral Debt Relief Initiative (MDRI). MDRI relief to Cameroon
implies a stock of debt reduction of 1.12 billion US$ in nominal terms at Completion
Point, in addition to the assistance already delivered by these institutions under the HIPC
Initiative. The IMF will provide 100% debt relief on all debt incurred to the IMF before
January 1 st , 2005 and that remains outstanding to date. This would result in debt service
savings of 38.2 million US$ on average over the period 2006-25.
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