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Analytical History of Heavily Indebted Poor Country (HIPC) Debt Sustainability Targets

Author

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  • Peter Hjertholm

    (Institute of Economics, University of Copenhagen)

Abstract

This paper traces the origins of World Bank indicators of debt distress and their employment as HIPC sustainability targets. These targets are interpreted as ‘switching values’, below which countries are (on average) expected to avoid debt service problems, but as such, they do not take into account that countries encounter debt service problems for a variety of reasons and at different levels of debt. It is likely that the ‘true’ switching value of the debt to export ratio of several HIPCs lies below the lower bound of the present target range. Regarding the ‘fiscal window’, the lack of analytical basis for a 280 percent target for the debt to revenue ratio is noted, and the consistency problems raised by the added ‘openness_tax’ condition are discussed. Moreover, the implications for economic performance of the pursuit for a s ustainable debt position remain a concern. It seems uncertain whether the development needs of HIPC countries can be accommodated within sustainable debt paths, as envisioned. The paper concludes that the sustainability targets, as presently applied, are not well supported in analytical terms. The rationale for adopting an average target range for the debt indicators involved remains weak, and the adoption of country_specific targets is suggested as a way to tailor debt relief more accurately to country needs.

Suggested Citation

  • Peter Hjertholm, 1999. "Analytical History of Heavily Indebted Poor Country (HIPC) Debt Sustainability Targets," Discussion Papers 00-03, University of Copenhagen. Department of Economics.
    • Handle: RePEc:kud:kuiedp:0003
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    File URL: http://www.econ.ku.dk/english/research/publications/wp/2000/0003.pdf/
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    References listed on IDEAS

    as
    1. van Wijnbergen, Sweder, 1989. "External Debt, Inflation, and the Public Sector: Toward Fiscal Policy for Sustainable Growth," The World Bank Economic Review, World Bank, vol. 3(3), pages 297-320, September.
    2. Cohen, Daniel, 1993. "Growth and external debt," CEPREMAP Working Papers (Couverture Orange) 9302, CEPREMAP.
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    Cited by:

    1. Bernhard G. Gunter, 2001. "Does the HIPC Initiative Achieve its Goal of Debt Sustainability?," WIDER Working Paper Series DP2001-100, World Institute for Development Economic Research (UNU-WIDER).
    2. Daniela López, 2003. "Assessing Bolivia´s debt relief under the heavily, indebted poor countries initiative," Revista de Análisis del BCB, Banco Central de Bolivia, vol. 6(2-1), pages 89-138, December.
    3. Elio Londero, 2003. "Trade liberalization and adjustment in Argentina," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 12(3), pages 225-246.
    4. Adeniji, Sesan, 2013. "The Upshot of External Debt on Economic Growth in West African Countries: A Panel Data Approach," MPRA Paper 52555, University Library of Munich, Germany.
    5. Manamba EPAPHRA & William MESIET, 2021. "The external debt burden and economic growth in Africa: a panel data analysis," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(2(627), S), pages 175-206, Summer.

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    More about this item

    Keywords

    Foreign Debt; Heavily Indebted Poor Countries (HIPC); World Bank; Debt Relief;
    All these keywords.

    JEL classification:

    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General

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