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Debt-Relief Effectiveness and Institution-Building

  • Andrea F. Presbitero

This article provides new evidence on the effects of recent debt-relief programmes on different macroeconomic indicators in developing countries, focusing on the Heavily Indebted Poor Countries (HIPCs). The relationship between debt relief and institutional change is also investigated to assess whether donors are moving towards ex-post governance conditionality. Results show that debt relief is only weakly associated with subsequent improvements in economic performance but is correlated with increasing domestic debt which undermines the positive achievements in reducing external debt service. There is also evidence that donors are moving towards a more sensible allocation of debt forgiveness, rewarding countries which have better policies and institutions. Copyright (c) The Author 2009. Journal compilation (c) 2009 Overseas Development Institute..

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Article provided by Overseas Development Institute in its journal Development Policy Review.

Volume (Year): 27 (2009)
Issue (Month): 5 (09)
Pages: 529-559

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Handle: RePEc:bla:devpol:v:27:y:2009:i:5:p:529-559
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