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Prospective aid and indebtedness relief: a proposal

  • BERLAGE, Lode
  • CASSIMON, Danny
  • DREZE, Jacques
  • REDING, Paul

Primary needs of human development are not met in poor development countries.Although ambitious goals have been set by the international community to meet specific human development targets by 2015, Official Development Aid is lagging and excessive external debt continues to drain much needed resources from poor countries despite the recent HIPC (Highly Indebted Poor Countries)Initiative. This paper outlines a 15-year program for implementing the 2015 Human Development targets while resolving fully the debt overhang problem for a set of 49 poor countries. The proposal requires additional contributions from 23rich countries amounting to 0.1 of 1% of their GDP over each of the 15y ears. Although only a small part of the effort would take the form of debt cancellation, the outstanding debt of the 49 poor countries would be totally extinct by year 2015. The program, to be implemented in a multilateral framework in which all interested parties have an effective voice, relies on several basic premises: a long term commitment by donors; a fair burden sharing among creditors; a fair distribution of newly available resources among poor countries, heavily indebted or not; a targeting of these resources to human development programs; a conditionality guaranteeing reasonable aid effectiveness.

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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2000032.

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Date of creation: 00 Jun 2000
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Handle: RePEc:cor:louvco:2000032
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