Analytical History of Heavily Indebted Poor Country (HIPC) Debt Sustainability Targets
AbstractThis 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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Bibliographic InfoPaper 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
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Foreign Debt; Heavily Indebted Poor Countries (HIPC); World Bank; Debt Relief;
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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- van Wijnbergen, Sweder, 1989. "External Debt, Inflation, and the Public Sector: Toward Fiscal Policy for Sustainable Growth," World Bank Economic Review, World Bank Group, vol. 3(3), pages 297-320, September.
- Gunter, Bernhard G., 2001.
"Does the HIPC Initiative Achieve its Goal of Debt Sustainability?,"
Working Paper Series
UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
- Bernhard G. Gunter, 2010. "Does the HIPC Initiative Achieve its Goal of Debt Sustainability?," Working Papers id:3205, eSocialSciences.
- 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.
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