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

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| 192 | 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) | 193 |
| 194 | Annexes Our analysis suggests that Cameroon has experienced a negative relationship between ODA and debt relief. Apparently donors have reduced their development assistance once they provided substantial debt relief. 5.4 Balance of Payments In 1996 the debt service represented nearly 20% of exports. In subsequent years the figure has declined steadily, until reaching approximately 1% in 2007. This decline can be explained by the steep decrease in the interest burden on external debt, but also by the steady increase of exports. The latter can be explained first by the effects of the 1994 devaluation and later on by the increasing value of oil exports which doubled between 1997 and 2007. Figure 17 Current and Capital Account: Billions of CFA francs 500 400 300 200 100 0 -100 -200 -300 -400 -500 1997 1998() 1999 2000() 2001() 2002 2003() 2004() 2005 2006(e) 2007(e) 2008(p) Current Account Capital and Financial Account Source: IMF Statistical Appendixes Cameroon’s current account had been negative during the 1980’s and the 1990’s (except in 1995, the year after the devaluation). Notwithstanding the declining interest payments on external debt and the rising value of oil exports Cameroon’s balance on current account remained negative up to the year 2005. As shown by table 6 this was due to a substantial rise of imports. After 2005 the effect of falling interest payments and increasing oil revenues outweighed the rise of imports 104 : 104 The information concerning the Balance of Payments differs markedly according to the sources, and even inside each source for different yearbooks. Those figures and tables can thus be criticized, but we took what seemed to be the most plausible information. Coming to Terms with Reality Table 6 Current and Capital Account, billions of FCFA, 1997 - 2008: 1997 1998() 1999 2000() 2001() 2002 2003() 2004() 2005 2006(e) 2007(e) 2008(p) Current Account -130,8 -231,8 -100,4 -259,8 -422,6 -388,2 -176 -318,9 -294 62 41 187 Trade Balance 216,5 117,1 386,7 380,6 -8,8 57,4 137 -29,8 23 284 157 411 Exports 1083,9 989,7 1399 1582,7 1399,3 13803 1370 1362,5 1547 1932 1941 2338 Oil 356,3 311,1 651,8 779 595,3 604,2 551 573,6 763 983 984 1360 Others 727,7 676,6 747,2 803,7 804 776,1 819 788,9 784 949 957 978 Imports -867,5 -872,7 -1012,3 -1202,1 -1408,1 -1322,9 -1233 -1392,3 -1524 -1648 -1784 -1927 Services (net) -410,5 -407,8 -550,7 -728,8 -505,6 -614,2 -428 -368,5 -188 -222 -265 -275 Inerest Due on public -269,9 -254,2 -231,4 -220,6 -183,6 -178 -155 -139,1 debt Others -140,6 -153,6 -319,3 -508,2 -322 -436,2 -273 -229,4 Income (net) -243 -131 -38 -148 of wich: Inerest Due on -122 -73 -37 -30 public debt Transfers 63,2 59 63,5 88,4 91,8 168,6 115 79,4 114 132 187 199 Capital and Financial -72,5 -82,7 -32,9 -135,5 230 269,3 -188 173 208 318 400 345 Account Overall Balance -202,9 -314,5 -133,5 -204,4 -191,8 -121,5 -363 -244,1 -86 380 441 532 Source: IMF Statistical Appendixes (between 1997 and 2006) | 195 |
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Page 115: Published by: Kingdom of Belgium Fe
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