STRATEGIES FOR FINANCING DEVELOPMENT The Newsletter of the HIPC CBP and the FPC CBP
Issue 30, 1st Quarter 2007 HIPC Debt Analysis & Strategy IADB MDRI Relief At Last 2 Debt Sustainability - Beyond the DSF 3 CBP Shows Improved HIPC Debt Management Capacity Since 2002 4 Missions to Finalise National Capacity Plans 6 Long Term Debt Sustainability Workshop 7 HIPC Country Progress and Debt Sustainability Status 8 MEFMI Enters Phase 3 (2007-2011) 10 HIPC CBP Recent and Forthcoming Activities 11 Debt Relief Technical Questions 16
Foreign Private Capital Flows FPC CBP Activities Update 13 Cameroon: High Foreign Assets And Intra-Regional Investment 14 Accessing And Using International FAL Data Sources 15 IADB MDRI RELIEF AT LAST
n January in Amsterdam, the 2007-2015 will be country specific, as those which are not being disbursed in a shareholders of the IADB finally shown in Table 1 below. For the four timely fashion and are not likely to meet I agreed on how to provide the IADB's post-HIPC countries this means FSO their development objectives. share of MDRI relief. The deal is resources will total approximately US$ 88 disappointing in that it will not provide million per annum with the remaining • For the five countries, part of the IADB additional funding to HIPCs, instead being on non-concessional OC terms. debt relief (totalling US$ 258 million) is to drawing its financing from the IADB's be exchanged against existing funds own concessional Fund for Special • The country specific FSO - OC lending which are due to be repaid to the IADB in Operations (FSO) resources. mix and the amounts committed to each local currency in 2010-13. These local country are to be determined on the basis currency conversions are to be cancelled of the BWI's Debt Sustainability and the amounts offset against the debt The IADB debt relief will cancel 100% of the Framework (DSF) and the IADB's service due on current FSO loans. If the eligible debt of its post-completion point Performance Based Allocation (PBA) debt service due is less than the currency HIPC borrowers (Bolivia, Guyana, Honduras system, which is to be reviewed and conversion requirement, then the and Nicaragua), effective from 1 January updated to be more in line with that of remaining obligation will be carried 2007. Haiti will qualify when it reaches its IDA. On this basis, better performing forward. HIPC completion point. The eligible debt is countries (Bolivia and Honduras) are the disbursed outstanding FSO debt, as of expected to benefit from higher resource • For the period 2007-10, $30 million of end-December 2004. allocations, while poorer performers FSO resources will be allocated to (Guyana and Nicaragua) may lose. technical assistance and from 2010 to Implications for Future Flows 2015 this will be $20 million. While the IADB will cancel debt totalling US$ • For Haiti, new resources will consist of up 3.37 billion, the relief is not additional. Its cost to $50 million in annual grants for the • In addition, the IADB is to reduce the is being met from internal FSO resources years 2007-2010. Thereafter Haiti will administration expenses borne by the without any additional funding. It will be have a maximum allocation of $20 million FSO to 15% of the total IADB reducing eligible countries' total resource in grants and $20 million in FSO loans administrative expenses through 2010, allocations by 25%, making the terms of their annually, with a proportion of OC loans with a further reduction to 11.25% by new borrowing less concessional, cancelling depending on its debt sustainability. 2015. The savings from this will average undisbursed loan approvals and exchanging about $75 million per annum. part of the debt relief against countries' local • For all the eligible countries, the currency contributions to the FSO. The undisbursed balances of approved but In terms of the impact on resource flows details of these changes are as follows: non-disbursed loans, as of 1 January between 2007 and 2015, Honduras tends to • There is to be a 25% reduction in total 2007, are cancelled. If the total cancelled benefit while Guyana, Haiti and Nicaragua do IADB loan allocations for Bolivia, Guyana, amount is less than US$ 210 million, then not. For more information on the detailed Honduras and Nicaragua (excluding Haiti there will be a proportional reduction in impact of the IADB MDRI, please see which is to receive mainly grants, see future loan approvals and disbursements http://www.hipc-cbp.org/files/en/closed/ below). The effect of this is to reduce the on a country-by-country basis to make External%20Debt%20Strategy/External%20D IADB's overall allocation of resources up the difference between the amount ebt%20Reference%20materials/MDRI_Feb_2 from $400 million per annum to $288 cancelled and US$ 210 million. The 007_En.pdf million. undisbursed balances to be cancelled are • For Bolivia, Guyana, Honduras and Nicaragua, the lower level of resources will be in the form of parallel loans, which is a blend of concessional FSO and Table 1 Lending Mix for Post HIPCs Under DSF as of 2007 nonconcessional Ordinary Capital loans. The FSO portion is to be a 40-year bullet loan at _% interest, while the OC portion Country FSO allocation OC allocation is to be a 30-year loan, with 5.5 year grace period and 5.5% interest. Up to Bolivia and Honduras 30% 70% now all four countries have been able to access solely concessional FSO Guyana and Nicaragua 50% 50% resources, however with this change the concessionality of their future IADB Haiti: 2007-2010 $50 million in grants borrowings will be reduced as they will now be borrowing a significant proportion 2011+ $20 m in grants/ $20 million FS0 loans of new resources on OC terms. The proportion of FSO and OC resources Source: IADB making up the new parallel loans from
2 DEBT SUSTAINABILITY - BEYOND THE DSF
n late November, the BWI Boards • continuing reduction of concessional debt. The HIPC CBP has recently discussed a report on applying the flows to Latin America, enhanced by produced a note on debt sustainability I Debt Sustainability Framework (DSF) financing IADB debt cancellation using indicators (see www.hipc-cbp.org for post-HIPC/MDRI low-income IADB concessional funds (see page 2);
3 CBP SHOWS IMPROVED HIPC DEBT MANAGEMENT CAP
ewsletter 29 compared the The scores show a clear improvement in improving capacity to design and contents, implementation five of the indicators, producing an implement borrowing policies. N and uses of the HIPC CBP overall rise of around 8%: • The area of the debt unit, which methodology for assessing debt • The areas of Institutional deals with the number and management capacity in HIPCs, Coordination (16%) and Legal qualifications of staff, as well as with the methodology in the IDA Frameworks (25%) show adequacy of the working Resource Allocation Index (IRAI) considerable improvements, environment, improved by around 4% (formerly known as CPIA). This reflecting an enhanced focus on during 2002-03. This makes the article analyses a four-year time these issues by the CBP regional improvements in other areas more series of scores, assessing organizations and CBP institutional remarkable, but reflects the wider progress in debt management missions. constraints on civil service staffing from 2002 to 2005 using the CBP • A smaller improvement (by only 7%) and conditions, as well as a worrying methodology. Thereafter it took place in debt strategy, reflecting reduction of debt management compares the trends with those in continued strong efforts by staffing in post-completion point the IRAI assessment, using governments in this area. However, countries, often on the grounds that comparable sections of the CBP the overall score here hides strong debt problems are resolved, which if methodology, and explains possible improvements in the quality of debt continued does not bode well for differences. strategy and portfolio analysis, and in long-term debt management the existence of a formal team to capacity. prepare strategies, as well as in • Additionally, it is worth pointing out 1) Methodology: Combining Phase 3 approval of strategies by government that within this area, there was a and 4 CBP and Comparing with and parliament, reflecting the small improvement in scores for data IDA increased recent focus of the CBP on recording during 2002-04, due to In 2002, the HIPC CBP moved from a fostering such debate through efforts by the Commonwealth system in which countries were Cabinet and parliamentary seminars Secretariat, UNCTAD and regional assessed by the implementing partner and inclusion of strategy discussions organizations to assist countries. For organizations to one in which they built in budget processes. These are 2005, once the phase 4 the assessment methodology and made considerably offset by declines in the methodology included recording of the initial assessments (though these are scores relating to the level of domestic debt, scores fell back still quality-controlled by the discussion of strategies with national somewhat, reflecting lower-quality implementing partners). At the end of civil societies and the international recording of domestic debt. phase 3 of the HIPC CBP (in 2005), the community, especially for post-HIPC CBP assessment methodology was countries. The only area in which scores have fallen updated to focus more closely on • Another area on which the CBP has (and then only since 2004) is for debt domestic debt and new financing. focused since the end of phase 3 burden indicators. This reflects the fact Therefore, to compare scores obtained was new borrowing, which shows a that under phase 4 of the CBP, countries under phases 3 and 4, it was essential considerable improvement (14% are allowed to choose the indicators (and relatively easy) to work out the since 2003), due to many new they see as most appropriate to relationship between the assessment methodological developments determine their debt sustainability (HIPC criteria in the two phases. In addition, it already made on aid quality and ratios, LIC DSF ratios or even regional or was essential to compare the IDA and borrowing ceilings, which are national ratios), whereas in phase 3, all CBP criteria: the methodology for how this was done was explained in newsletter 29. Table 1: Monitoring Progress in Debt Management Capacity Building 2) Assessing Debt Management (adjusted to IDA scale) Progress in Detail Having established a clear time series on May-02 May-03 May-04 May-05 this basis, it is possible to assess Debt Burden Indicators 3.25 3.48 3.59 3.02 progress in HIPC debt management New Borrowings 3.33 3.09 3.38 3.52 since 2002. Institutional Coordination 3.02 3.05 3.16 3.51 Average of Debt Unit Area 3.73 3.87 3.87 3.88 Table 1 shows the trends since 2002 for Average of Debt Strategy Area 3.13 3.18 3.22 3.34 the six aspects used by IDA: Debt Average of Legal Framework Area 2.65 2.72 2.86 3.30 Burden Indicators, New Borrowings, Total Average for all criteria 3.28 3.36 3.42 3.53 Institutional Coordination, Debt Unit, Debt Strategy, and Legal Framework.
4 MANAGEMENT CAPACITY SINCE 2002
Graph 1 shows that, according to the Graph 1: Monitoring progress using CBP methodology HIPC CBP, Post-Completion Point (Adjusted to IDA scale) countries clearly have the highest debt management scores, at 3.84. However, 4.5 there has been progress since 2002 in 4 all groups of countries with the average s s s s score going from 3.29 in 2002 to 3.53 in 3.5 2005. The biggest improvement in 3 scores, albeit from the lowest level, took s Pre DP HIPC place among pre-Decision Point 2.5 DP HIPC countries, which moved from 2.52 to 2 3.00. Post-Decision Point and Post CP HIPC Completion Point countries also showed 1.5 smaller degrees of improvement, moving 1 from 3.14 to 3.30, and from 3.62 to 3.84 0.5 respectively.
0 The levels of scores for post-completion 2002 2003 2004 2005 point countries are broadly similar using Source: HIPC Countries self evaluation questionnaires the CBP and IDA methodologies, though broadly IDA finds the scores stable or slightly declining since 2003. IDA's starting scores for the other groups are the same as those of the CBP, but Graph 2: Monitoring progress using IRAI scores thereafter trends have diverged 4.5 considerably, with a fall in scores for both interim period and especially pre- 4 s s s s decision point HIPCs. 3.5 It is difficult to understand why the IDA 3 s Pre DP HIPC scores would be so different from those 2.5 of the CBP, which have been validated DP HIPC 2 by countries and quality-controlled by CP HIPC implementing partner organisations. 1.5 Ultimately, the discrepancy may reflect 1 different methodologies, especially the weaknesses in the IRAI methodology 0.5 and the more in-depth nature of the 0 analysis conducted by the CBP, which 2002 2003 2004 2005 were highlighted in Newsletter 29.
Source: Debt Relief for the Poorest: An evaluation update of the HIPC Initiative. The World Bank Independent Evaluation Group. 2006 2005 IDA Resource Allocation Index (IRAI)
countries were using the same HIPC the conversion of CBP scores from a 5- indicators to determine the sustainability point scale to match the IDA 6-point of their debt. As a result, sustainability as scale. Graphs 1 and 2 above show the judged by the countries has fallen trends in debt management capacity for because of the inclusion of domestic different countries based on their stage debt. This represents a clear warning of within the HIPC process, as identified by the need to take domestic debt fully into the HIPC CBP and IDA methodologies. account in assessing sustainability. Countries were classified as Pre Decision Point, between Decision Point and 3) Comparing CBP and IDA scores Completion Point, and Post Completion As explained in newsletter 29, comparing Point. The cut off date for determining the two methodologies requires notably their classification was December 2005.1
1 Because Lao PDR and Madagascar have not received assistance from the CBP they are not included in the CBP scores, but their exclusion from the IDA scores would not change any of the conclusions presented. 5 MISSIONS TO FINALISE NATIONAL CAPACITY BUILDING PLANS
standards, and to ensure that focused on front office activities capacity building is part of a general (issuing securities, fundraising, and framework of developing a true debt service payments) and back culture of sound public debt office activities (recording and management in CFA Franc Zone accounting). he BEAC/BCEAO Pôle-Dette countries; has initiated information and • Pôle-Dette's future activities will T data gathering missions to • Identify the skills available in each therefore particularly target the finalise national public debt government, at all stages of the debt capacity building required to manage management capacity building cycle, and on this basis, assess the middle office activities, while also plans in the CFA Franc Zone capacity building requirements of the improving front office and back office countries. These missions institutions and individuals who functions. successively visited Lomé (Togo) intervene in the debt cycle, in order and N'Djamena (Chad) during 7-15 to raise their debt management to • In terms of the types of activities, two October; Bissau (Guinea Bissau) international standards; specific types of capacity building on 16-20 October; Bamako (Mali) support are required to bring debt and Malabo (Equatorial Guinea), • Identify all activities required to fill the management to international 28 October-5 November; Dakar identified skills gaps (national standards in the Franc Zone (Senegal), 30 October-3 workshops, regional seminars for countries. November; Libreville(Gabon) and managers or decision-makers, Niamey (Niger), 5-12 November; publications, field missions, distance • The countries will need institutional Brazzaville (Congo), 13-25 learning, etc.) and the institutions that support to strengthen the November; Bangui (Central can provide them; governments' financing and debt African Republic), 18-26 laws, as well as reinforce November; Ouagadougou (Burkina • Ensure that there is consistency coordination among institutions, and Faso), 25 November-8 December; between capacity building plans for to draft manuals regulating and and Abidjan (Côte d'Ivoire) 8-14 agencies intervening in the public analysing debt management December. Missions to Cotonou debt cycle, and their training plans for procedures and information flows (Benin) and Yaoundé (Cameroon) individual staff members. among the institutions, to guide the will be scheduled during first personnel involved in debt quarter 2007. Based on model national capacity management. building plans provided earlier to these countries, HIPC CBP self-assessment • Approximately 600 debt managers The main purpose of these missions was questionnaires, and aide-mémoires from must be trained in various front, to assist the authorities in these previous missions providing institutional middle and back office functions countries to design national debt support to public debt management, the such as risk management, effective management capacity building plans missions received contributions from use of debt management software, according to a model designed by Pôle- almost all agencies involved in the debt debt sustainability analysis, global Dette. More specifically, the plans will cycle, and reached the following public debt strategies, and legal ensure that Pôle-Dette focuses its conclusions: matters. activities to address the real needs of member countries in its programme, in • Despite the efforts by Pôle-Dette and all areas of debt management (going HIPC CBP, which in most countries beyond the capacity building activities have achieved important concerning debt analysis and strategy in improvements in capacity in recent the context of the Heavily Indebted Poor years, a large skills deficit was Countries Debt Strategy and Analysis observed in middle office (strategy Capacity Building Programme (HIPC design and analysis) functions, CBP). They will therefore guide the Pôle- particularly in the post-HIPC context Dette project during its second phase. where emphasis is placed on mobilising new high-quality financing Against this backdrop, the missions to support national development aimed to: objectives; and on risk management to avoid overindebtedness in the • Define the volume and profile of skills years to come. essential to raise public debt management to international • The available skills are substantially
6 LONG TERM DEBT SUSTAINABILITY WORKSHOP
he second HIPC CBP workshop Ghana Sierra Leone on the BWI's Long-Term Debt Ghana's key baseline assumptions were: In the case of Sierra Leone, following T Sustainability Framework (DSF) GDP growth of 8% until 2015 due to strong recovery in the immediate post took place in the WAIFEM region accelerating infrastructure investments, and conflict, real GDP growth is expected to from January 22-26. It was 6% thereafter; exports growing with GDP slow gradually from 7.4% in 2006 to 6.6% organized and facilitated by and imports with domestic demand; and in 2010 and stabilize at around 5.2% up to WAIFEM, DRI, the IMF and the the cedi depreciating in line with relative 2026. Exports are to rise from 22.2% of World Bank, and attended by 38 inflation. The baseline scenario and stress GDP in 2006 to 28.3% in 2010 as a result executive/middle level officials from test results pointed to continued debt of expansion in mining. Imports will grow in the Central Banks, Ministries of sustainability with maintenance of the line with GDP. Inflation will decline from Finance, Debt Management Offices, current policy of concessional borrowing 12.2% in 2006 to 6% in 2015 and stabilize Statistical Bureaus, and Offices of with a minimum 35% grant element, or at around 5% thereafter. Under this the Accountant General, from The even with a small amount of non- baseline scenario, without taking into Gambia, Ghana, Liberia, Nigeria, and concessional borrowing. However, account MDRI relief, debt sustainability will Sierra Leone. MEFMI officials and continuance of historical growth rates not be assured until after 2020. Under the candidate fellows from Lesotho and would lead to explosion of the debt most extreme stress test, debt Swaziland also attended. indicators to exceed the DSF thresholds by sustainability will only be achieved in around 2017-22. relation to GDP in the next 20 years. Sierra Leone is therefore a high risk debt distress Liberia country pending MDRI relief. Objectives Because Liberia has not reached HIPC The main objective of the 5-day workshop decision point, it assumed large amounts of Participant Recommendations was to train WAIFEM's constituent debt relief in its baseline scenario, as well The participants highly appreciated the countries on the DSF and to build their as new borrowing on only concessional workshop and recognized the need for all capacity to provide their governments with terms. Based on new FDI, real GDP growth low income countries to have a forward- early warning signals on potential risks. The was projected to rise from 7.8% in 2006 to looking borrowing strategy and observed workshop covered the following broad 12.7% in 2026, with inflation stabilizing at that the new LIC template is a relatively themes: 5.3. The baseline scenario, and an user friendly tool for this purpose. • Operational Framework for Debt alternative scenario which tested less debt However, they observed that: Sustainability Assessments in Low- relief, both produced unsustainable debt • endogenous variables like GDP are Income Countries ratios throughout the period. The Liberia determined outside the template and • Technical Underpinning of LIC Debt team concluded that this highlights the there is a need to expand the template Sustainability Framework(DSF) need for macroeconomic and structural to ensure that macroeconomic variables • The DSF implications for the World reform, capacity and institution building, are interconnected; Bank and the Fund maximum debt relief and highly • BWI staff should complete a user- • Helping low-income countries avoid concessional future borrowing. friendly manual to guide understanding debt distress and customization of the template, and • DSA incorporating Domestic Debt Nigeria make it available to country teams to • Thereafter, each country team ran a Nigeria assumed in its baseline that the facilitate DSAs; DSA using 3 scenarios namely baseline, current reform programme anchored on • the BWIs should set aside 2 days historical and stress test, and made a objectives of the National Economic during Article 4 missions to conduct the presentation highlighting its findings on Empowerment and Development Strategy DSF analysis with officials of the the last day. (NEEDS) is sustained, producing an countries to further strengthen their average real GDP growth rate of 5.1%, with capacity; Conclusions of the Country gradually declining inflation. Based on these • there is need to continue capacity Presentations numbers, the Nigeria team concluded that building on the DSF through step-down The Gambia in order to avoid a relapse to debt and step-up training; The Gambia's baseline analysis assumed overhang the country should: • countries should create or strengthen that for 20 years, exports would grow at 7- • borrow from only concessional sources national DSA teams; 8%, imports at 6% and real GDP at 5%. (IDA or near IDA terms), including official • countries should improve the quality of Nominal exchange rate depreciation was bilateral borrowing with a maximum 3% macroeconomic and debt data and assumed to be relatively low. The Gambia interest and not less than 10 years include information on private sector concluded that to achieve long term debt maturity. external debt and contingent liabilities in sustainability it must continue public • limit the growth of debt stock to only debt databases for comprehensiveness external borrowing on concessional terms 3.6% of GDP a year until 2011, and to of debt sustainability analysis. only with sustained GDP growth and 0.7% thereafter. exchange rate stability.
7 8 IMF &World Bank HIPC Governments, Sources: HIPC PROGRESS AND DEBT SUSTAINABILITY STATUS MARCH 2007 omrilbnspnig reta asi.MDRI commercial bankspending; Argentian lawsuit. ooed20 AW NA NA NA 8/02 90% … 2/01 6/02 12/00 … … 4/01 3/00 6/00 … nocurrenttimetable 11/01 end-2007 4/00 Yemen Vietnam Togo Tanzania W NA … 2005 nocurrenttimetable Angola odrs70 /570 00 93% 10/01 7/00 4/05 Honduras 7/00 rte ocrettmtbeN W NA NA 97% W 11/03 NA W 96% W 5/02 02/03 W 5/00 NA 7/00 87% W 81% … nocurrenttimetable NA NA W 95% 4/05 86% nocurrenttimetable … forHIPC Decidednottoapply 12/02 7/05 85% W 87% 5/00 12/00 2007 8/02 88% 90% 85% 2/02 W 6/00 9/01 2/00 NA 8/05 9/01 noPRSPprocess 97% 12/00 W 12/00 Nepal nocurrenttimetable 9/01 1/01 4/04 3/03 12/06 91% Kyrgyzstan NA nocurrenttimetable 4/00 12/00 Eritrea W W 4/05 Potential HIPCs 8/02 4/04 NA NA 3/02 6/00 4/00 Zambia 9/00 NA 1Q2007 2Q2008 11/03 1/04 W noPRSPprocess W 12/00 12/00 12/00 96% 81% Uganda 9/01 12/00 3/03 12/04 6/02 2/04 1/07 12/00 12/00 W nocurrenttimetable 90% W 81% W W 85% 09/06 Sudan end-2007 4/00 Somalia 9/02 9/00 92% 2/00 4/01 8/00 10/04 Sierra Leone … 81% 12/00 Senegal 4/03 NA W 93% 11/06 W 11/06 7/02 São Tomé & Príncipe 11/00 12/00 Rwanda mid-2007 9/02 nocurrenttimetable NA Niger nocurrenttimetable 93% 93% 60% Q32008 8/00 7/02 12/00 Nicaragua 12/00 10/01 … 12/03 Myanmar Mozambique 3/01 10/06 98% Mauritania 84% 2007 mid-2007 12/00 2009 7/04 2Q2007 7/03 NA 7/06 11/00 Mali 76% 7/00 3/02 99% Malawi 2ndhalf2007 12/00 4/04 Madagascar 12/00 12/04 2/02 05/06 7/03 Liberia 7/00 6/02 9/06 mid-2007 4/05 12/00 Laos PDR … 7/00 3/03 Kenya 11/01 end-2009 10/00 … 1Q2008 1/01 2008 Honduras 7/00 1/04 mid-2007 Haiti 5/00 03/06 7/00 Guyana 95% 5/01 4Q2007 05/06 Guinea-Bissau 7/03 end-2007 … Guinea 4/02 Ghana 3/03 10/00 8/05 Gambia 6/01 2Q2007 Ethiopia 7/00 Côte d’Ivoire 7/00 of Rep. Congo, of Rep. Dem. Congo, 2/00 Comoros Chad Rep. Central African 6/01 Cameroon Burundi Burkina Faso Bolivia 2/00 Benin Countries 3 2 1 Blend andgap countriesare noteligible forIDAgrants. (December 2006). distress, Yellow =moderate risk ofdebtdistress andRed =highriskofdebtdistress. LatestDSF-basedDSFforBolivia(July 2006) andHonduras This isthedebtdistress ratingforFY07incorporating DSF-basedDSAsandusedasbasisfor IDAtraffic lightclassification: Green =lowriskofdebt institutional strength andpolicyperformance(Strong ≥3.75,medium3.25-3.75, weak≤3.25).Basedon2005CPIA. World BankIDA Resource AllocationIndex (IRAI),formerlyCountryPolicyandInstitutional Assessment(CPIA),whichisusedtoassess countries' eiinCmlto nei ia CreditorParticipation Final Interim Completion Decision ICI ae PRSPDates HIPC IIDates HIPC Initiative
This table has been revised to include HIPCs' rankings according to the BWI's IRAI (formerly CPIA) indicator of policy performance and institutional strength and debt distress, incorporating the new DSF-based DSAs and used as the basis for countries' IDA allocation of loans and grants.
IRAI ranking of Debt distress ranking IDA-14 grant policies and institutions1 for IDA-14 FY072 allocation for FY07 Key Debt Relief and New Financing
Weak Moderate 50% HIPC CBP DSA shows ratios under HIPC thresholds Medium Low 0% Most creditors provide relief, unsustainable due to new borrowing. MDRI Medium Low na3 New borrowing ceilings. Debt unsustainable compared to Treasury revenues. MDRI Strong Low 0% Algeria, Libya, Saudi, Taiwan refuse relief. MDRI. New borrowing ceilings Weak High 100% IDA, ADB , Paris Club creditors providing interim relief and promise of relief from EU Medium Low 0% Facing increasing lawsuits. MDRI Weak High 100% Arrears being cleared before HIPC DP Weak High 100% IsDB and BADEA providing interim assistance Weak High 100% DP could be mid-2007 once PRGF concluded. High arrears. Weak High 100% USA only PC creditor yet to finalise relief. Agreements with 13 commercial creditors signed. Weak High 100% IMF interim relief pending negotiations with London Club. Lawsuits continue Weak High 100% DP delayed because of civil conflict. Potentially qualify with PV/revenue=361% Medium Moderate 50% Still to conclude with some non-Paris Club creditors. MDRI Weak High 100% Interim IMF relief suspended, IDA and AfDF interim relief limit reached Strong Low 0% Signed agreements with almost all creditors. MDRI Weak High 100% IMF, AfDB, PC interim relief suspended. Egypt, Kuwait, Saudi willing to provide relief Weak High 100% Only IDA and AfDB providing interim relief. Round Table donor meeting held in Nov 2006. Medium Moderate 50% Lawsuit relating to government bonds ongoing. MDRI Weak High 100% Possible HIPC relief of US$ 139m in PV terms.
Strong Moderate na na 3 Guatamala, Mexico and Taiwan refuse to provide relief; agreements with Cosat Rica, Venezuela, Kuwait and commercial banks pending; Argentian lawsuit. MDRI Medium Low 0% DSA shows ratios under HIPC thresholds. PC Houston terms relief Weak High 100% Despite eligibility, government does not wish to participate in HIPC Weak High 100% Debt stock estimated $3.7 bn (3000% of exports), nearly all in arrears. Debt data being reconciled with creditors Medium Low 0% Well advanced with PC relief, contacting all non-PC creditors. MDRI Medium Moderate 50% CP plus topping up reached in September 2006. MDRI Medium Low 0% Difficulties with non-PC creditors. MDRI Weak Low 0% Unsustainable due to lack of relief from Arab creditors. MDRI Medium Low 0% Agreements with China, Kuwait and South Africa. MDRI Weak High 100% No WB lending since 1987. Probably unsustainable Medium Moderate 50% Strong debt strategy and borrowing ceiling. New non-PC relief but lawsuits continuing. MDRI Medium High 100% No agreement with non-Paris Club creditors. Taiwan won lawsuit. MDRI Medium High 100% Ceiling on new borrowings. Received topping up at CP. MDRI Weak High 100% To receive retroactive PC relief following new PRGF Strong Low 0% Benefited from non-PC creditors relief. MDRI Weak High 100% Lawsuits for US$35m. MDRI Weak High 100% Accumulating large arrears to creditors. World Bank engaged under LICUS Weak High 100% IMF urged to minimise non-concessional borrowings. Need to clear arrears. Strong Low 0% Benefited from non-PC (Bulgaria, China and Kuwait) relief. MDRI Weak High 100% Potentially qualify with PV/revenue of 394% Strong Low 0% Ceiling on new borrowings, seeking more grants as debt is unsustainable. MDRI Medium Low 0% Debt ceiling for public debt/GDP of 50% by 2010 Medium Low 0% Ratios under HIPC thresholds so Paris Club Naples stock treatment Medium Low 0% Donegal lawsuit has resulted in payment to be made. MDRI
Weak Low 100% Potentially qualify with PV/exports of 362% Medium Low 100% Potentially qualify with PV/revenue of 345% Medium Low 100% Potentially qualify with PV/exports of 201%. Authorities undecided about HIPC participation.
Dates for HIPC decision and completion points and PRSPs are those of final BWI Boards' approval. Most governments have published PRSPs several months before BWI approval. 9 MEFMI ENTERS PHASE 3 (2007-2011)
MEFMI operates in a context where most senior officials of the ministries of significant progress has been made at finance and planning, and central bank global level to reduce poverty in recent governors, and all member states have years, but progress in Africa has been fully paid their annual contributions. very limited. In the MEFMI region, some Apart from member states, the issue of countries have managed to attain high sustainability involves other stakeholders, he third phase of MEFMI rates of economic growth in recent including cooperating partners and the begins on 1 January 2007, years, and others are well on the way to Secretariat. To date cooperating partners T following approval by economic recovery, but in the majority of have contributed a significant share to MEFMI's Board of Governments of countries poverty levels are still very the MEFMI budget and have affirmed a project document that outlines high. In all countries, however, MEFMI their willingness to continue to support the strategies, funding, needs to play a pivotal role in reinforcing the institute on the understanding that governance and management the necessary capacity to manage the member countries will increase their structures to be used for effective economic development policy. The main technical leadership of capacity-building delivery of capacity building challenge for member states remains and their financial contributions activities over a five-year period. inadequate human and institutional progressively over phase 3. Part of the capacity to deliver the economic answer to sustainability is for member fundamentals for sustained economic states to gradually increase their MEFMI is a regionally-owned institute growth and poverty reduction. contribution ratio to the budget and for with 13 member countries (Angola, the Institute to train more fellows and Botswana, Kenya, Lesotho, Malawi, MEFMI is a centre of a wide network of increasingly use regional experts in the Mozambique, Namibia, Rwanda, stakeholders who have an interest in delivery of training and capacity building Swaziland, Tanzania, Uganda, Zambia macroeconomic and financial activities. and Zimbabwe). MEFMI aims to build management both in the region and sustainable capacity in identified key internationally. These stakeholders Although MEFMI operates in a five-year areas in ministries of finance, planning include the member states, who make cycle for planning purposes, member commissions and central banks, or annual contributions accounting for states that own the Institute consider it a equivalent institutions. It strives to approximately 43% of the budget; and permanent institution. In each member improve sustainable human and financial cooperating partners (the ACBF, state there are still obvious capacity institutional capacity in the critical areas Austria, Canada, Ireland, the gaps to be tackled. Member state senior of macroeconomic and financial Netherlands, Norway, Sweden, officials confirmed during the management; foster best practices in Switzerland and the UK). In addition, consultation processes for preparing the related institutions; and bring emerging MEFMI has technical cooperating project document that there is need to risks and opportunities to the fore partners who provide staff and technical rebuild capacity due to staff changes among executive level officials. It seeks resources to capacity building activities. and attrition, and that given the dynamic to achieve, within its member states, These include the AfDB, IMF, World nature of the macroeconomy there is prudent macroeconomic management, Bank and their respective institutes, BIS, need for new methods to tackle new competent and efficient management of DRI, COMSEC, UNCTAD, UNITAR, and challenges. For all these and other public finances, sound, efficient and the US Federal Reserve System. The reasons, MEFMI will continue to play a stable financial sectors and stable relationship with all these stakeholders vital role in building sustainable capacity economies with strong and sustained has been mutually beneficial and MEFMI in the region. growth. intends to continue and deepen these relationships. In the last ten years MEFMI has scored a large number of successes in the Independent reviews together with delivery of its capacity building consultations with stakeholders have programmes. Reviews and end of indicated very strong support of MEFMI project evaluations have scored highly on by member countries and other key dimensions including: the validity of stakeholders because the Institute the main assumptions of capacity delivers products and services needed building; programme objectives; outputs, by member state institutions. These have impact and relevance; and progress in confirmed that over the long term, the implementation of work plans. At the Institute's products and services will still same time MEFMI has learned lessons be in demand, making it sustainable that will be useful in the design, from that perspective. The countries also implementation and monitoring of future regard the institution as vital: as a result, activities. the Board of Governors comprises the
10 HIPC CBP RECENT AND FORTHCOMING ACTIVITIES
Regional Workshops/Seminars of State for Treasury, Strategy for Poverty management cycle; The joint WAIFEM/DRI/World Bank/IMF Alleviation Coordination Office (SPACO), Gambia • improving computerised aid information Workshop on the Long Term Debt Revenue Authority, Department of State for flows in government and with donors, and Sustainability Framework for Low Income Health, Department of State for Fisheries, • finalising an aid policy document as the basis Countries took place in January (see article on Gambia Bureau of Statistics, Policy Analysis Unit- for donor alignment with government page 3). Office of the President and Department of State priorities (based on that designed in 2005 for Education. It aimed to provide comprehensive with CBP assistance - see issue 26). National Workshops training in the analysis of debt strategy and new Based on best practices by other developing Burkina Faso (Ouagadougou, 12-23 financing issues, update the Government DSA countries, the mission agreed an action plan with February). Pôle-Dette and DRI organised a conducted in 2000 and constitute a national the Permanent Secretariat of the CNCA. national workshop to design a strategy for future team for the regular updating of the national debt mobilisation of new financing. This was the most strategy. Simultaneously, the mission trained the personnel recent stage in a process through which the of the Treasury Department to write the debt HIPC CBP has been assisting the government to The key finding of the workshop was that after management analytical report for January 2007. redefine its legal and institutional framework and receiving all planned HIPC relief, the Gambia's It noted that an AfDB-funded project is expected its strategy goals for future public sector external debt is projected at USD 294.8 million, to enhance Burundi's use of the DMFAS 5.3 development financing. It trained 38 officials in corresponding to a PV/export ratio of 166.3%, debt recording system over the next two techniques of analysis and strategy formulation and will stay unsustainable until 2009. As a months, providing more automatic data for future as well as refining plans for the implementation of result, the Gambia might qualify for topping up reports. It also made recommendations for work Burkina Faso's national debt management debt relief under the Enhanced HIPC Initiative. programming within the Treasury, to ensure that capacity-building plan (see article on NCBPs on Therefter, implementation of the MDRI would staff play clearly-defined roles in the preparation page 6). reduce all ratios to clearly sustainable level and dissemination of future reports. throughout the 20-year projection period, The workshop achieved its three main goals: provided that it implements a prudent Chad (N'Djamena, 15-20 January). Pôle-Dette • To analyse Burkina Faso's debt sustainability (concessional) borrowing policy. organised a training mission for the members of using the new DSF methods of calculating the National Debt Analysis Committee (CONAD) PV and ratios, as well as the regional Institutional/Follow-up Missions and the technical team responsible for debt economic convergence criteria of the Burundi (Bujumbura, 5-16 February). This DRI sustainability analysis (ETAVID). This training UEMOA zone. The workshop found that mission had two goals: to help the National Aid followed from an initial mission to assist the after MDRI relief Burkina Faso's debt was Coordination Committee (CNCA), created in CONAD in April 2005, which had trained officials sustainable using both methods of August 2006, to plan how to implement its in how to prepare a debt sustainability analysis assessment. mandate; and to help the Treasury Department and to design a strategy for reducing the • To define borrowing ceilings for future public of the Finance Ministry to implement a government's debt burden. This training, which sector indebtedness, to feed into the 3-year completion point trigger condition agreed with lasted 6 days for 20 officials, therefore Medium-term Expenditure Framework and the IMF - production of a monthly analytical concentrated on how to analyse the the budget process. Government officials report on Burundi's debt. The Burundian government's repayment capacity and its agreed preliminary ceilings including a small authorities saw this mission as essential, determinants, how to set sustainable borrowing proportion of less concessional borrowing because they have just approved their final PRSP ceilings and budget deficit levels, and how to (with a grant element of between 35% and and want to switch away from the humanitarian calculate the impact of debt relief on the budget. 50%). assistance which has predominated during the • To define a set of principles for a Burkina conflicts of recent years, and accelerate their Guinea-Bissau (Bissau, 6-10 February). Pôle- Faso national aid strategy, as well as absorption of development-related aid, which is Dette and DRI organised a follow-up mission to conducting a “baseline” assessment of the expected to grow as Burundi moves to its HIPC provide training to Guinea-Bissau's technical degree to which donors are currently completion point. officials. The subjects included: basic concepts in following these principles. The officials debt management; debt portfolio analysis and agreed on 5 principles, which will guide the The mission found that Burundi needs to review review techniques; dissemination of debt government's efforts to improve its aid its aid management procedures to 1) increase information within and beyond government; debt management policies and procedures, as government-wide ownership of the potential relief under the HIPC Initiative and the MDRI, and well as donors' efforts to align with these in benefits of aid coordination; 2) clarify the roles of by the Paris Club; policies and procedures for the context of (but also going beyond) the each government agency in the aid cycle; and 3) mobilising new financing; recent developments in Paris Declaration. ensure that each structure better fulfils its key international aid financing; best practices in aid functions in ensuring that aid is disbursed on management by low-income countries; and the The Gambia (Banjul, 12-22 February) schedule and produces sustainable results. It macro-economic framework for debt This WAIFEM-DRI workshop (cofinanced by therefore recommended: management. DFID) was attended by 30 officials from the • holding a national aid coordination workshop Department of State for Finance and Economic to harmonise legal documents and validate a Participants came from the Finance Ministry, the Affairs, Central Bank of The Gambia, Department “framework-document” regulating the aid Economics Ministry, the National Economic
11 HIPC CBP RECENT AND FORTHCOMING ACTIVITIES continued
Policy Committee, and the BCEAO. At the end of updated to include the latest CIRR rates and the training, the participants made interest and exchange rates for debt strategy contribution to Pôle-Dette's success recommendations for how Guinea-Bissau could get analysis. over 6 years, has moved to AFRITAC- maximum benefit from future debt relief and aid • work is on-going to update the DSA workshop Libreville. Pôle-Dette has also recruited flows. In particular, they recommended the manuals to further enhance the CBP's two macroeconomic experts adoption by government of a comprehensive legal domestic debt strategy methodology, allowing (Appolinaire Houenou from Benin and and institutional framework which covers all stages officials to ensure that domestic debt issuance Gabriel Ngakoumda from Cameroon) of the process of financing government operations, is coherent with domestic debt supply needs who will start work in March 2007. the urgent finalisation and implementation of the (for Government budget financing and • CEMLA has recruited an Economist, PRSP, and further reinforcement of the capacities of monetary policy implementation) and with Jaime Andres Garron Bozo, from the personnel involved in debt and aid management to demand by financial and private sector Central Bank of Bolivia, who will work reduce reliance on external expertise. institutions for government paper to enhance on the activities of both the HIPC financial sector development. The updated capacity-building programmes. Mali (Bamako, 15-19 January). Pôle-Dette manual tasks, tables and templates will be • DRI. Due to Yolande's leave of organised a mission to build the capacities of the available for countries to use shortly. absence, DRI has appointed Mame National Public Debt Management Committee in Pierre Kamara as temporary Mali. The training provided to 25 participants Distance Learning Programme Francophone Programme Manager focused on: best practices in public debt In the distance learning programme, most students and Myriam Sallah as Francophone management, Benin's experience in coordinating completed their second module and started their Programme Administrator. In addition, public debt management with macroeconomic third module in the week of 5th March 2007. Sandrine Lévy has returned from policy, techniques of formulating and forecasting Heavy work schedules have prevented some maternity leave to resume her duties government financing strategies, and basic students from completing their assignments on as Distance Learning Programme elements of the construction of borrowing ceilings. time, but most of them are doing their best to Administrator and Travel Coordinator. At the end of the training, participants made several catch up. CBP partners have been taking the recommendations for reinforcing the capacities of opportunity to meet with students when in-country the personnel in charge of middle office (debt for other events, most recently in Burkina Faso, Future Activities strategy formulation) activities. Malawi, Senegal and Tanzania. These meetings During the next six months, the HIPC CBP will have been very productive and useful in providing implement the following activities: Pôle-Dette National Capacity-Building feedback on the programme, which has been very 1. Regional Workshops: Distance Learning Planning Missions. During the last quarter of positive, with students indicating that they learn Programme Mentors Workshop, Pôle Dette 2006, missions to Pôle-Dette member countries more than in workshops. The students have also and MEFMI on the New BWI Debt have designed national capacity-building plans (see been highly appreciative of the feedback and Sustainability Framework, Training for Trainers page 6). comments provided by Mentors. However, they for Pôle-Dette and PALOP countries; have indicated that some of the data-related 2. National Workshops: Bolivia (2 sub-national Methodology, Distance Learning and assignments are very time-consuming: as a result debt workshops), Burundi, Cape Verde (non- Attachments the CBP is already taking steps to ensure that data CBP), Ethiopia, Guyana, Kenya, Mali, Niger, Methodology are provided in more refined formats. Senegal, Uganda. Methodology work this quarter has focused on the 3. Institutional/Follow-up Missions: Benin, following: Attachments Cameroon, Central African Republic, Chad, • the MDRI documentation has been updated to Leonard Rugwaziba Minega from Rwanda was Comoros, Congo, Côte d'Ivoire, Ethiopia, the incorporate the relief to be provided by the attached to the Centre for the Study of African Gambia, Ghana, Guinea, Guinea-Bissau, Inter-American Development Bank announced Economies of Oxford University during 31 October- Guyana, Honduras, Liberia, Malawi, Mali, in January 2007 (see also page 2). The 11 November, in order to further develop CBP Mauritania, Mozambique, Nicaragua, Niger, updated document is now available on the methodology to analyse the effects of aid flows on Rwanda, Sao Tomé e Principe, Rwanda and HIPC CBP website (www.hipc-cbp.org) the macroeconomy. He worked on a Rwanda case Senegal. • a technical note explaining the debt study as well as on simple spreadsheet-based 4. Attachments: of a CEMLA staff member, a sustainability indicators and thresholds currently modelling tools to enhance the analysis, and is MEFMI fellow, MEFMI staff and Pôle-Dette being used internationally, regionally and expected to finalise this work during an attachment fellows to DRI, and of Pôle-Dette and non-RO nationally, the methodologies used for their to DRI in Q2 2007. fellows to the IMF in Washington; calculations, and the main purposes for which 5. Information products: the CBP will distribute they are being used has been prepared. The Staff changes its publication on Debt Negotiations within the note also explains how DSF indicators are used During the last few months there have Enhanced HIPC Framework, and prepare the to assess country eligibility for IDA grants and been a few staff changes in the CBP manuscript on Best Institutional and Legal loans. This was distributed via the March 2007 implementing agencies. In particular, Practices for Debt Management, produce Listserve and is available on www.hipc- • BEAC/BCEAO Pôle Dette. Mme newsletters 31 and 32, and disseminate 4 cbp.org. Coumba FALL GUEYE, Technical listserves on latest debt management • the technical resources pages of the HIPC Coordinator, who made a major developments. CBP website (www.hipc-cbp.org) have been
12 FPC CBP ACTIVITIES UPDATE
he first quarter of the year saw • Rwanda's proposal to participate in the assessment and identified many priorities for the FPC CBP pursuing its CBP in 2007 is currently being finalised future work to be assisted by MEFMI. T activities at country level by • Tanzania (Cycle 3) will have preliminary finalising various country project data and summary analysis ready for a WAIFEM and the IMF Statistics Department cycles, developing its information closing and dissemination workshop in (STA) hosted a DFID-funded GDDS products, and continuing to assist Q2 2007, followed by a training event to External Sector Workshop on FDI in potential new applicants, while launch the next cycle, and publication of Accra during 26 February - 2 March, with further elaborating plans for an full reports for Mainland and Zanzibar DFI participating to optimise coordination extension of the programme to the • Uganda (Cycle 5) has increased with the FPC CBP. The event launched a entire CFA Franc zone. response to over 90%. It is preparing to GDDS Module for a group of 5 countries disseminate data, publish a joint Cycle (The Gambia, Ghana, Kenya, Mauritius, and 4/5 analytical report, and launch Cycle 6 Mozambique), and discussed methodology, COUNTRY PROGRESS in Q2. country implementation plans, and (following The programme countries have progressed • Zambia is finalising the identification of on from meetings between STA and DFI last as follows: financing for a potential relaunch of its November) optimal coordination with the • Bolivia has requested CBP assistance participation in the programme in Q3. FPC CBP for countries participating in both on more advanced areas of monitoring programmes. and analysis. Meanwhile Bolivia's FPC CBP SOFTWARE Confederation of Private Employers (a In response to country demand, EIS has Outcomes from both these events will be member of the National Taskforce) has added a new feature to the Administrative reported in more detail in the next issue. published its own BOP analysis Module, to promote user-friendliness and (www.cepb.org.bo) speed. Version 1.79.7.2 features a “copy INFORMATION PRODUCTS • Burkina Faso has finalised its pilot survey button” which enables the user to The FPC CBP website (www.fpc-cbp.org) phase and published its report. create a new survey by editing the features continues to be updated every 6 weeks. • Cameroon has finalised its analytical of a previous survey (questions, years, The last update, in January, covered latest report (see page 14 for the findings), and currencies, industrial classifications, etc) developments in the CBP and related will close its pilot phase in March. rather than having to create from scratch. initiatives (on FAL, investor perception, CSR, • Ethiopia is working with DFI to finalise a Registered users can download this latest remittances, and methodology). Country proposal to join the CBP version and accompanying new guidelines analytical reports and Newsletter 29 are now • The Gambia (Cycle 2) is preparing to in the Software Users' Manual by following available for download on the open pages of host a second Follow Up Mission in the DFI link on www.evinsol.co.uk/software. the site. FPC CBP Briefing #12 was March to finalise data quality checks and EIS is due to finalise shortly the draft Section disseminated in January, and Briefing #13 is begin analysis and report writing, follow 3 of the Software Technical Manual for due in March. Past issues of the Briefings up on institutional priorities, and prepare Designers (VBA Programming with an are now also stored on the open pages of the next cycle interactive dummy database), which will be the website. • Ghana has confirmed World Bank circulated for user comment. It is also funding, and is finalising arrangements providing direct support to The Gambia and FORTHCOMING WORK PROGRAMME for a launch to go ahead in Q2. Uganda. In the next quarter the FPC CBP will: • Honduras is following up with donors • Undertake demand assessment about financing arrangements for entry GOVERNANCE AND LIAISON missions (Ghana, Honduras and Kenya), in the programme with a launch in Q2 MEFMI hosted its first Regional an opening workshop in Bolivia, a follow • Kenya has World Bank financing for the Monitoring and Managing Foreign up mission and closing workshop in programme and is pending final Private Capital in MEFMI Member Nicaragua, and combined confirmation of arrangements so it can Countries Workshop in Lusaka during 5-9 closing/training events in The Gambia, join the CBP in Q2 March, for all 13 of its member states. It Malawi, Tanzania and Uganda; • Malawi (Cycle 3) is working on data featured training in all aspects of monitoring • Finalise plans for wider programmes for quality checks, and is planning a closing and analysis, with support from MEFMI and the CFA Franc Zone and Latin America dissemination event in June 2007 DFI staff and a pool of regional resource • Finalise its publication on analytical combined with training for the next people. Important methodological advances findings cycle were planned on issues relating to non- • Continue to produce information • Nicaragua (Cycle 1) is pursuing survey mechanisms, financial statements products, methodology, and software fieldwork and will be hosting a Follow Up and sampling. In addition, countries • Refine and implement a dissemination Mission in April to focus on data and (whether participating in the FPC CBP or and awareness strategy. analysis not) conducted their own capacity
13 CAMEROON: HIGH FOREIGN ASSETS AND INTRA- REGIONAL INVESTMENT
ameroon has recently concluded its (independence, effective application of decisions); • FDI was the main contributor (over 60% of total pilot survey of foreign assets and enhanced arrangements under the Investment by end 2004). But this masked a decline in C liabilities and investor perception, a full Charter; improved maintenance of existing equity after the completion of the Chad- report of which will shortly be available via the infrastructure; and improved energy supply. Cameroon Pipeline and declines in the Wood, FPC CBP and national websites. A National Paper, and Printing Sector, which were offset by Taskforce comprising public and private Foreign Assets and Liabilities large increases in intra-company debt stock agencies, donors and cooperating partners The table below shows that the stock of foreign • “Other investment” was the second most (MINEFI, BEAC, GICAM, CGCI, SNV and DFI) assets increased steadily and substantially during important component comprising debt from surveyed 226 enterprises for investor 2002-4. Stock of liabilities also increased but (the first unrelated sources (almost 40%) in the form of perceptions, and 147 (covering 86% of time for a CBP country) stayed lower than assets. trade credits and other debt turnover and 90% of foreign capital) for assets This reflected very high deposits held abroad by • Portfolio investment was recorded, but remained and liabilities. It achieved excellent first time Cameroonian residents: excluding these, liability low. response for FAL (almost 60%). In line with stocks were 2-3 times higher than assets. Liability best practice, survey data was checked and flows exceeded asset flows during 2003, but the Investment showed the following patterns by sector uprated using non-survey data. As this article situation reversed during 2004 with a large drop in of economic activity… shows, the exercise yielded very good data on liability flows, and rise in asset flows. • By far the biggest recipient was transport, assets (a very challenging area in most storage and communication (57%). This was countries) and liabilities, and generated Assets followed by electricity, gas and water (8%); valuable practical lessons for future surveys The table shows that Cameroon's assets were commerce and other services (7%); agro- reports. predominantly debt rather than equity related. By far industry and the financial sectors (each 6%) the most significant component were deposits held • Portfolio investment was concentrated in drinks abroad, followed by trade credits to unrelated and financial sectors (reaching 89% stock by Investor Perception recipients. FDI in the form of lending to related 2004) To enhance coordination with other surveys, the enterprises was the next largest, and FDI equity and • Over half the trade credits from unrelated questionnaire combined IFC-style business climate portfolio were very small by comparison. sources went to the mining sector in 2004, with the wider methodology of the FPC CBP. The followed by commerce and other services (20%), main positive perceptions of investors related to: All these items increased over the period… and the chemical industry (11%) • National and regional market size, and access to • FDI stock tripled due to large intra-company • Almost two thirds of other debt from unrelated credit debt flows. This was primarily intra-regional and sources went to transport, storage and • Productivity and the cost of qualified personnel related to mining concerns in Mauritania (25%), communication, which was related mainly to • Efficiency/cost of telecommunications and Equatorial Guinea (15%), Congo Brazzaville, Mali, construction of the Chad-Cameroon Pipeline access to the Internet Gabon and Chad • Good-quality economic and political information • Mining also accounted mainly for increased …And by source country … products issued by government and private deposits in foreign banks by 7-9%, and (in spite • Most FDI was from the USA (41% by 2004), and sector agencies (in contrast to many other FPC of declines in other sectors) in trade credits this concentrated in transport, storage and countries, where word of mouth and local • Lending by Cameroon's financial sector to non- communication. France followed (31%), but by contacts have tended to be most important to residents remained at less than 28 billion FCFA contrast invested widely across all sectors decisionmaking). • Portfolio assets remained marginal, and were implying wider knowledge of opportunity. Intra- mainly intra-regional (Côte d'Ivoire (20%), Chad regional investors included Côte d'Ivoire, Overall, the vast majority of respondents considered (19%), Equatorial Guinea (16%)), and to France Mauritius, Nigeria, and Senegal the level of risk in Cameroon to be acceptable - and (18%) • Two thirds of portfolio came from the EU, therefore most planned to expand their future although perhaps reflecting its inherent volatility, operations. Liabilities sources fluctuated, most notably with the The stock of liabilities increased by 51% during 2002- Netherlands share decreasing from 55% to 15% The negative factors are mainly governance and 4. Of these: of stock. infrastructure-related: • 94% expressed concern with taxes, other charges, and related bureaucracy. On average, Cameroon's Foreign Assets and Liabilities (in billions of CFA Francs) respondents indicated they spent 28 days during 2005 on meetings with tax authorities, 1.8 days Item Assets Liabilities per week on tax and customs procedures, and Stock Flow Stock Flow Stock Stock Flux Stock Flux Stock 13 days delay to clear customs at Douala 2002 2003 2003 2004 2004 2002 2003 2003 2004 2004 • 73% lacked confidence in the judiciary TOTAL (incl. deposits) 2531 423 2954 603 3557 1884 617 2500 350 2850 • Almost half rated corruption as having a strong negative impact FDI 116 104 220 135 355 1261 296 1557 154 1711 • Challenges to competitiveness included Equity 8 ... 8 1 9 959 145 1104 -76 1028 contraband, fake goods, and informal sector Intra-company debt 109 103 212 134 346 302 152 453 230 683 imports Portfolio 2 … 2 1 371 8 17 25 • The quality and costs of roads and energy were rated poorly Other 2413 319 2732 468 3200 617 319 936 179 1115 Consistent with these findings, respondents indicated Trade credits 477 174 651 292 943 245 199 444 211 656 priority areas for improvement for policymakers to be Other debt 15 12 27 0 27 372 120 492 -33 459 reducing taxes; reinforced use of the accounting Deposits 1921 133 2054 176 2230 - - - - - system (OHADA); reform of the legal system
14 ACCESSING AND USING INTERNATIONAL FAL DATA SOURCES
ewsletter 29 considered the not as thorough as BOPSY or UNCTAD's and 2 contain global and regional analysis. extent to which international FDI, and may not always be BPM5- Annex A presents further analytical data, and N compilers use FPC CBP country compliant. data sources and methods by country. Annex data, compared international datasets, Article IV reports contain recent economic B gives FDI time series by country and region and made general observations on developments; “other issues” (which may for in US$ for Inflows, Outflows, Inward Stock, their quality. The FPC CBP encourages example include a discussion of data quality); Outward Stock, Flows to Gross Fixed Capital countries to refer to international data and summary BOP indicators. Selected Formation, and Stocks to GDP. Additional so as to crosscheck them against their Issues reports cover topical issues. A tables distinguish Mergers and Acquisitions own national data, fill gaps, assess Statistical Appendix may be published transactions by region / country, and sector / acceptance of national data, and separately or attached to Selected Issues industry. Most of the data are obtained from compare national against wider reports. In addition to summary BOP, it can national investment promotion agencies. regional and global trends for analysis include data helpful for analysis, eg on the and policy making. This article tax system, labour and sector indicators, OECD FDI Database describes how to access and use infrastructure, and prices. PRGF reports The International Direct Investment Statistics selected international datasets, cover current and intended government Database and related Yearbook can both be highlighting those that provide policies, and can be useful for linking National obtained via the OECD site. They include additional analytical benefit. Development Plans to CBP Policy Action summaries, and detailed tables by country Plans for example to sector and economic and sector. However, both are subject to a IMF Balance of Payments Statistics growth, regional priorities and CSR. charge, although it is possible to subscribe Yearbook (BOPSY) for a free trial to the Database (via BOPSY is the most comprehensively World Bank Global Development Finance www.sourceoecd.org). Countries may presented source in terms of coverage, (GDF) alternatively want to contact the OECD published annually in line with BPM5, and Volume 1 contains the analysis and outlook Investment Division direct, for information on therefore one of the first points of reference. which often touches on CBP-related issues, availability and how best to access creditor Unfortunately it is not free to download, and and summary tables, which may be freely sourced FDI data by country via needs to be purchased from the IMF. Part 1 downloaded from the World Bank website www.oecd.org/daf/investment. This site also contains country tables, Part 2 regional and (www.worldbank.org). Volume 2, which needs includes links to freely downloadable related global, and Part 3 metadata. The country to be purchased, contains the country tables. information on codes and standards and tables in Part 1 present an 8 year time series These comprise 10 sections with several analysis. These data are extremely valuable of historic data in US$, coded to IMF / OECD years' time series in US$. They do not as a creditor-sourced crosscheck against conventions: comply fully with BPM5. Relevant items data collected in country, and are • Table 1 gives a 1-page summary of the include PSED long-term debt data, net FDI, recommended to all countries. Financial Account's broad components portfolio equity, profits remitted on FDI, • Table 2 is a better reference point, with a private net transfers, and worker remittances. BIS - OECD - IMF - World Bank Joint 4-page breakdown of the Current However, arrears and short-term debt do not External Debt Hub (JEDH) Account (including investment income distinguish private non-guaranteed debt, and This is of limited relevance to FPC CBP and transfers), Capital Account (including unfortunately for many of the low-income countries as it provides data only for SDDS migrant transfers) and Financial Account countries PSED data are not reported. Data countries. There are plans to extend to GDDS (detailing the above-mentioned are compiled from secondary (mostly countries, which would make JEDH the first components) developing country) sources. point of reference for countries seeking to • Table 3: International Investment Position crosscheck their own data against creditor is provided for some countries only (and UNCTAD FDI Databases and Analysis data, because it includes creditor-sourced presented as a time series of end-period UNCTAD compiles FDI and related data from the BIS. Unfortunately the JEDH stocks rather than strictly as an IIP) information in the following databases: FDI / Database does not distinguish public and As discussed in newsletter 29, the BOP/IIP TNC (the primary UN source for FDI data and private sector external debt. Therefore, from data are taken from country sources. TNC activities); Cross-border M&A (deals and the homepage (www.jedh.org), users are parties involved); the largest TNCs (sales, therefore advised to follow the “data release IMF Country Reports assets, employment etc); and Investment and calendar” link, which leads to a page These are downloadable free from the IMF tax treaties by country and region. Much data indicating which of the four participating website (www.imf.org), via the “Information by is freely available in different formats via the institutions supply each data line. The country A-Z” links on the homepage. Each website (www.unctad.org), and can be “Contact JEDH” link from this page gives country page presents publications reverse accessed interactively (subject to free details for the person (in almost all cases chronologically, and they can also be sorted registration) with a facility to prepare data from the BIS) countries should contact to by type. They can provide very useful extracts. obtain more detailed PSED information. resources for analysis and policy, as well as more recent data than BOPSY, and data The freely downloadable World Investment projections. But on historical data, they are Report (WIR) is a good starting point. Part 1
15
DEBT RELIEF TECHNICAL QUESTIONS
What are the best debt relief terms available from non-Paris Club bilateral creditors?
The HIPC CBP Publication No. 11, NEGOTIATING DEBT REDUCTION IN THE HIPC INITIATIVE AND BEYOND, will be published soon. In the process of finalising it we have updated information on what all creditors are giving as terms, finding out about considerable progress on Russian debt, non-Paris Club bilaterals, multilateral institutions and lawsuits. Below we print the new version of our table describing what non-Paris Club bilaterals are doing. Those of you who are negotiating with these creditors will probably spot some very useful precedents set by other HIPCs in these negotiations. For more details and any further assistance, please contact us at DRI.
Best Terms Agreed with Non-Paris Club Bilateral Creditors Best Terms Agreed with Non-Paris Club Bilateral Creditors
TYPE OF DEBT GRACE PERIOD MATURITY PERIOD BASE INTEREST RATE "MARGIN %" "PENALTY %"
Algeria Concessional 7 24 2% 0 +1 Angola No agreement to relief - creditor is HIPC and lacks resources Argentina Buybacks at 8-16% of face value but rapid payment of rest Bulgaria Bilateral Comparable relief Reduced from 5% to 0% 0 +4 Commercial No debt relief - see lawsuits in Chapter 7 Burundi No relief provided but initial threats of lawsuits dropped - see Chapter 7 Cape Verde No comparable treatment - debt was workers remittances China Commercial No HIPC-comparable relief LIBOR 1 +1 ODA Comparable - cancels 100% of stock at end 2004 if diplomatic relations ColombiaI MF indicates promised comparable treatment to Honduras Costa Rica Agreed to provide comparable relief but still being negotiated Cote d'Ivoire No agreement to relief - creditor is HIPC and lacks resources - but has dropped lawsuit Cuba Cancels 100% for countries with good relations Czech Rep Buybacks at 10-16% of face value - comparable with Lyons or Cologne DRC No agreement to relief - creditor is HIPC and lacks resources Ecuador No agreement to relief - legal constraints to cancellation cited Egypt No agreement to relief Guatemala Buyback of debt by Spain, then HIPC comparable relief provided Honduras Indicated similar operation to Guatemala possible Hungary Commercial 90% cancellation, reschedule rest over 16 years, 0 grace, 0% interest during grace India ODA Comparable - lines of credit 100% written off ECGCorporation No comparable relief LIBOR 2 +1 Iran No agreement to relief - cites legal constraints to cancellation Iraq No agreement to relief for 7 countries - sold debt to commercials who are litigating Korea (DPR) No agreement to relief Korea (Rep) Concessional Reduced from 2.5% to 1% +2 Kuwait Kuwait Fund 10 30 1-4.5%, reduced to 0.5-2% 0 +0 Kuw Inv Authority No agreement to participate in HIPC - needs to change law Libya Mixture of cancellation, conversion at 20% and payment - usually not comparable Mexico 90.5% cancellation under HIPC I Morocco Promised but not yet delivered comparable relief Namibia No agreement to relief Niger No agreement to relief - creditor is HIPC and lacks resources Nigeria No agreement to relief Oman No agreement to relief for 6 countries Poland 80% cancellation and 20% for embassy costs - comparable HIPC I Peru No agreement to participate in HIPC - cites legal constraints Romania Buybacks at 8-10% of face value but sold some debts to commercial Rwanda Comparable relief for Uganda but not DRC Saudi Arabia "Saudi Fund (if fully disbursed)" 10 30 Reduced from original to 1-2% 0 +0 Serbia (ex-Yugo) Some ex-parastatals buyback at 95% discount, many seeling then lawsuits - see Chapter 7 Slovak Rep Commercial 6 23 0% for 10 years then 3% for 3 0 South Africa Cancels 100% of debt Taiwan No agreement to relief for 11 countries - sued Niger - see Chapter 7 Tanzania Buyback of Uganda debt funded by Austria @ 10%, remainder cancelled Thailand No agreement to relief UAE "Abu Dhabi Fund (arrears only)" 5 12 Not comparable - 2% 0 0 Venezuela 100% cancellation for countries with good relations Zambia No agreement to relief - creditor is HIPC and lacks resources Zimbabwe No agreement to relief - creditor is severely indebted and lacks resources
Sources: HIPC Governments; IMF/World Bank September 2006
Debt Relief International / Development Finance International 16 4th Floor Lector Court, 151-153 Farringdon Road, London EC1R 3AF, United Kingdom t: +44 (0)20 – 7278 0022 f: +44 (0)20 – 7278 8622 e: [email protected] http://www.hipc-cbp.org http://www.fpc-cbp.org