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.
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Paper provided by University of Copenhagen. Department of Economics in its series Discussion Papers with number
00-03.
Length: 44 pages Date of creation: Mar 1999 Date of revision: Handle: RePEc:kud:kuiedp:0003
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Find related papers by JEL classification: F34 - International Economics - - International Finance - - - International Lending and Debt Problems O10 - Economic Development, Technological Change, and Growth - - Economic Development - - - General
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References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Selowsky, Marcelo & Van Der Tak, Herman G., 1986.
"The debt problem and growth,"
World Development,
Elsevier, vol. 14(9), pages 1107-1124, September.
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