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Grant Element Calculations

Grant element calculation formulas

Hands-on exercise to calculate grant element
This allows users to input specific loan information of a given loan to calculate the grant element of the loan.


Definition

"Concessionality"

"A net present value calculation, measured at the time the loan is extended, that compares the outstanding nominal value of a debt and the future debt-service payments discounted at an interest rate applicable to the currency of the transaction, expressed as a percentage of the nominal value of the debt. The concessionality level of bilateral debt (or tied aid) is calculated in a similar manner, but instead of using the nominal value of the debt, the face value of the loan is used–that is, including both the disbursed and undisbursed amounts, and the difference is called the grant element." (IMF (2003), External Debt Statistics: Guide for Compilers and Users, p.250, June 25) (http://www.imf.org/external/pubs/ft/eds/Eng/Guide/file6.pdf)

"Grace period"

It is defined as an interval between the commitment date and the date of the first payment of principal (DAC, OECD).

"Interval"

It is defined as an "interval between the commitment date and the first repayment date minus the interval between two successive repayment" (DAC, OECD).


Discount rate

Discount rate, depending on the maturity of the debt

The discount rate is the CIRR rate plus the margin, when calculating the grant element of a loan so as to identify a non-concessional loan under the IDA Free Rider Policy.

  • if the maturity is less than 15 years, six-month average CIRR plus 0.75%;
  • if the maturity is 15 years or more, but less than 20 years, ten-year average CIRR plus 1%;
  • if the maturity is 20 years or more, but less than 30 years, ten-year average CIRR plus 1.15%; or
  • if the maturity is 30 years or more, ten-year average CIRR plus 1.25%;
  • For those currencies whose CIRRs are unavailable but are pegged to a hard currency, the CIRR for the relevant hard currency is used. Otherwise, the SDR rate is applied.

where:

  1. “six-month average CIRR” means the average of the Commercial Interest Reference Rates for the currency of the debt to be incurred by the Recipient over the most recently published six month period ; and
  2. “ten-year average CIRR” means the average of the CIRRs for the currency of the debt to be incurred by the Recipient over the most recently published ten year period.
  3. “Commercial Interest Reference Rates” means the monthly CIRRS for debt denominated in the relevant currency with a maturity exceeding 8.5 years in, published by the Organization for Economic Cooperation and Development (OECD).
  4. Margines vayring by loan maturity are those employed in the context of IMF PRGF arrangements or PSIs.

    See OECD web site for CIRRs by currency
    - http://www.oecd.org/searchResult/0,2665,en_2649_34171_1_1_1_1_1,00.html
    - http://www.oecd.org/dataoecd/15/47/36644390.pdf


IDA Controls

IDA Controls Management Response 

IDA Controls Fact Sheet (October, 2010)
                     IDA Controls Fact Sheet (April, 2010)
FAQs on IDA Controls (October, 2010)
                     FAQs on IDA Controls (April, 2010)
IDA Controls Five-Point Action Plan


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