IDEAS home Printed from
   My bibliography  Save this paper

Working Paper 75 - External Shocks and the HIPC Initiative: Impacts on Growth and Poverty in Africa



After providing a brief background on recent developments of terms of trade shocks anddebt relief initiatives, the paper uses a simple macroeconomic model to estimate theimpact of debt relief and terms of trade shocks on growth and poverty in Africancountries. For the 18 Heavily Indebted Poor Countries (HIPCs) that reached the enhancedHIPC decision point by end-December 2000, the basic quantitative findings are asfollows:· HIPC debt relief has boosted economic growth in these countries by an average of2.9 percent per annum (everything else remaining the same).· The computed result of this increase in growth is a reduction in poverty by anaverage of 2.2 percent per annum.· However, recent deteriorations in the terms of trade might have counter-balancedthese positive effects by lowering growth by an average of 2.0 percent per annumand by increasing poverty by an average of 1.3 percent per annum.· Clearly, much of the positive impact emanating from the HIPC Initiative has beeneroded due to recent deteriorations in the terms of trade. The HIPC-inducedgrowth and poverty reduction have been reduced each to an average of 0.9 percentper annum.The paper also estimates the net effect on growth and poverty of the recently agreed 100percent multilateral debt relief. This is predicted to boost economic growth by an averageof 5 percent per annum and reduce poverty by about 5.3 percent per annum for the groupof all African HIPCs. The paper concludes that 100 percent debt relief is crucial forAfrica, but that more aid and policies need to be focused on a long-term developmentstrategy that fosters the necessary structural transformation.

Suggested Citation

  • Nureldin Hussain & Bernard Gunter, 2005. "Working Paper 75 - External Shocks and the HIPC Initiative: Impacts on Growth and Poverty in Africa," Working Paper Series 210, African Development Bank.
  • Handle: RePEc:adb:adbwps:210

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Dawn Richards Elliott & Rupert Rhodd, 1999. "Explaining growth rate differences in highly indebted countries: an extension to Thirlwall and Hussain," Applied Economics, Taylor & Francis Journals, vol. 31(9), pages 1145-1148.
    2. Krugman, Paul, 1988. "Financing vs. forgiving a debt overhang," Journal of Development Economics, Elsevier, vol. 29(3), pages 253-268, November.
    3. Geda, Alemayehu, 2002. "Debt Issues in Africa: Thinking beyond the HIPC Initiative to Solving Structural Problems," WIDER Working Paper Series 035, World Institute for Development Economic Research (UNU-WIDER).
    4. Collier, Paul, 2002. "The Macroeconomic Repercussions of Agricultural Shocks and their Implications for Insurance," WIDER Working Paper Series 046, World Institute for Development Economic Research (UNU-WIDER).
    5. Christian Broda & Cedric Tille, 2003. "Coping with terms-of-trade shocks in developing countries," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 9(Nov).
    6. Thirlwall, Anthony P & Hussain, Mohammed Nureldin, 1982. "The Balance of Payments Constraint, Capital Flows and Growth Rate Differences between Developing Countries," Oxford Economic Papers, Oxford University Press, vol. 34(3), pages 498-510, November.
    Full references (including those not matched with items on IDEAS)

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:adb:adbwps:210. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Adeleke Oluwole Salami). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.