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

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Annexes
5.2 External Debt Service
The debt relief under the HIPC Initiative has had a substantial effect on the debt service
payments. Figure 15 shows the evolution of the external public debt service in terms of
exports of goods and services, and in terms of Government revenues.
Figure 15 External public debt service as percentage of exports of goods and services
and of government revenues
Percent (%)
35
30
25
20
15
10
5
0
1996
1997
1998
1999
external public debt service ratio (% exports)
external public debt service ratio (% goverment revenue)
Source: IMF data, various country reports
The table suggests that debt alleviation had direct effects on debt service. Between 2000
and 2005 the decline was gradual. After 2005 we observe a sharp decline.
5.3 ODA, Debt Relief, and Additionality
2000
2001
One issue linked to debt alleviation is the problem of additionality. In this section we use
the main definition used in the literature, which considers debt relief as additional if “it
does not lead to lower levels of other non-debt relief aid flows (that is crowding out) for
the debtor concerned” (POWELL, R. (2003)). Some authors and institutions (World Bank,
OED (2003); DIJKSTRA, G. (2004); COHEN et al. (2004)) have highlighted the problem of
additionality under the HIPC Initiative at the end of the 1990’s and the early years 2000.
They concluded that a number of countries which had reached the HIPC Decision Point
before year 2000 were experiencing declines in the ODA inflows as debt relief was granted.
We analyze the evolution of ODA received by Cameroon before and during the HIPC
Initiative with the purpose of assessing whether there has been a negative relation between
debt relief and traditional ODA. A negative relation would suggest a lack of additionality
2002
2003
2004
2005
2006
2007
Coming to Terms with Reality
of debt relief. Figure 16 shows the evolution of total net debt relief and total net ODA
disbursements, excluding net debt relief, between 1994 and 2007. The figure also shows the
average annual ODA received by Cameroon between 1994 and 2000, and between 2000 and
2006 (the HIPC interim period) 101 .
The data we use are at constant 2006 prices. They cover ODA and debt relief received by from all
donors (bilateral as well as multilateral). Because the number of observations is limited it is not
possible to obtain any statistically significant correlation between net ODA (exclusive of debt relief)
and net debt relief 102 . The following discussion, therefore, needs to be taken with some precaution.
Looking carefully at the years 1995 – 2005 in figure 16, we observe that an increase (a decrease) in
debt relief is often accompanied by a decrease (an increase) in net ODA.
A comparison of average annual ODA received during the HIPC interim period with the average
figure for the preceding years shows that the ODA receipts have decreased after Cameroon had
reached the Decision Point in 2000. Between 1994 and 2000 average ODA was approximately 520
million US$. Over the years 2000-2006 it fell to less than 360 million US$, i.e. by 30%. For the sake
of comparison, we checked the ODA received by Cameroon since 1970. During the 1970s
Cameroon received on average annually approximately 400 million US$ of ODA. Subsequently
annual ODA receipts increased to 450 million US$ in the 1980’s and 570 million US$ in the 1990’s.
Between 2000 and 2007 the figure decreased to approximately 370 million US$ 103 .
Figure 16 Net ODA (excluding net debt relief) and Net Debt Relief, at constant 2006 prices,
1994-2007:
Constant Prices, 2006 Million US $
1400
1200
1000
800
600
400
200
0
-200
1994
1995
1996
ODA Total, excl. Debt
1997
1998
1990
Memo: Net debt relief
Source: Development Assistance Committee (DAC)
2000
101 The year 2000 is used for the calculation of the two averages, to make the averages overlap.
102 The data on debt relief for Cameroon becomes annually continuous only in 1994 (we have one data in 1990 and
1991, but no data before), so we do not have enough information to compute any robust and statistically
significant correlation. When we regress ODA (excluding debt relief) on debt relief, we know that there are a lot
of possible problems (i.e. endogeneity, causality, lack of control variables, too few data…), but the sign of the
coefficient is negative.
103 We used a t-test to see if the mean of ODA between 1990 and 1999 and between 2000 and 2007 received by
Cameroon was statistically different, and the test showed us it is effectively the case.
2001
2002
2003
2004
2005
2006
2007
Average ODA (94-00) Average ODA (94-00)
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