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Low Income Countries and External Public Financing : Does Debt Relief Change Anything?

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  • Marin Ferry

    (Institut de Recherche pour le Développement (IRD), DIAL - Développement, institutions et analyses de long terme, LEDa - Laboratoire d'Economie de Dauphine - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres)

  • Marc Raffinot

    (LEDa - Laboratoire d'Economie de Dauphine - IRD - Institut de Recherche pour le Développement - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique, DIAL - Développement, institutions et analyses de long terme)

  • Baptiste Venet

    (LEDa - Laboratoire d'Economie de Dauphine - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres, DIAL - Développement, institutions et analyses de long terme)

Abstract

Low income countries (LICs) generally have very little access to the international financial markets. Inthe 1990s, bilateral creditors and international financial institutions started granting LICs debt reliefunder the Heavily Indebted Poor Countries (HIPCs) initiatives and continued with the more recentMultilateral Debt Relief Initiative (MDRI). Have these debt relief initiatives led official and privatecreditors to change their lending policy with respect to beneficiary countries? This paper addresses thisquestion using difference-in-differences methodology. Our findings tend to show that official lenderstighten their HIPC financing policy, shortening grace and maturity periods, and reducing the grantelement on new loans once debt relief has been provided. We also find that beneficiary governmentsmanage to diversify their financing sources by borrowing more from private creditors once they havecompleted the HIPC process and have received additional debt cancellations under the MDRI.

Suggested Citation

  • Marin Ferry & Marc Raffinot & Baptiste Venet, 2019. "Low Income Countries and External Public Financing : Does Debt Relief Change Anything?," Working Papers hal-02304314, HAL.
    • Handle: RePEc:hal:wpaper:hal-02304314
    Note: View the original document on HAL open archive server: https://hal.science/hal-02304314
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    References listed on IDEAS

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    12. Marin Ferry, 2019. "The carrot and stick approach to debt relief: overcoming moral hazard," Journal of African Economies, Centre for the Study of African Economies, vol. 28(3), pages 252-276.
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    Cited by:

    1. Marin Ferry & Marc Raffinot, 2019. "Curse or Blessing? Has the Impact of Debt Relief Lived up to Expectations? A Review of the Effects of the Multilateral Debt Relief Initiatives for Low-Income Countries," Journal of Development Studies, Taylor & Francis Journals, vol. 55(9), pages 1867-1891, September.
    2. Marin Ferry, 2021. "Quel bilan tirer des initiatives d'annulation de la dette des pays pauvres très endettés ?," Revue d'économie financière, Association d'économie financière, vol. 0(1), pages 225-240.

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    More about this item

    Keywords

    Debt Relief; low-income countries; access to financial markets; concessionality; Annulation de dette; Pays à faible revenu; Financement international; Concessionalité;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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