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Low Income Countries and External Public Financing : Does Debt Relief Change Anything?


  • Marin Ferry

    () (LEDa, UMR DIAL, université Paris-Dauphine)

  • Marc Raffinot

    () (LEDa, UMR DIAL, université Paris-Dauphine)

  • Baptiste Venet

    () (LEDa, UMR DIAL, université Paris-Dauphine)


(english) Low income countries (LICs) generally have very little access to the international financial markets. In the 1990s, bilateral creditors and international financial institutions started granting LICs debt relief under the Heavily Indebted Poor Countries (HIPCs) initiatives and continued with the more recent Multilateral Debt Relief Initiative (MDRI). Have these debt relief initiatives led official and private creditors to change their lending policy with respect to beneficiary countries? This paper addresses this question using difference-in-differences methodology. Our findings tend to show that official lenders tighten their HIPC financing policy, shortening grace and maturity periods, and reducing the grant element on new loans once debt relief has been provided. We also find that beneficiary governments manage to diversify their financing sources by borrowing more from private creditors once they have completed the HIPC process and have received additional debt cancellations under the MDRI. _________________________________ (français) Cet article évalue l'impact des initiatives d'allègement de dette multilatérale sur les conditions de réendettement extérieur des gouvernements bénéficiaires auprès de créanciers officiels et privés. Les résultats de cette étude indiquent qu'avoir bénéficié des initiatives PPTE (Pays Pauvres Très Endettés) et IADM (Initiative d’Annulation de Dette Multilatérale) conduit les gouvernements concernés à contracter des emprunts officiels comprenant des périodes de grâce et de maturité plus courtes (et donc un « élément-don » plus faible) que s'ils n'avaient obtenu ces annulations de dette. Nos résultats montrent également que les gouvernements bénéficiaires parviennent à emprunter davantage auprès de créanciers privés une fois leur dette annulée. Cependant, des tests additionnels révèlent que cet accès à de nouveaux marchés financiers ne s’effectue qu’après l’octroi des annulations de dette sous l’IADM et que les investisseurs internationaux privés ne s’autorisent donc à prêter aux PPTE qu’une fois la quasi-totalité de leur dette extérieure annulée.

Suggested Citation

  • Marin Ferry & Marc Raffinot & Baptiste Venet, 2016. "Low Income Countries and External Public Financing : Does Debt Relief Change Anything?," Working Papers DT/2016/16, DIAL (Développement, Institutions et Mondialisation).
  • Handle: RePEc:dia:wpaper:dt201616

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    References listed on IDEAS

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    Cited by:

    1. Marin Ferry & Marc Raffinot, 2019. "Curse or Blessing? Has the Impact of Debt Relief Lived up to Expectations? A Review of the Effects of the Multilateral Debt Relief Initiatives for Low-Income Countries," Journal of Development Studies, Taylor & Francis Journals, vol. 55(9), pages 1867-1891, September.

    More about this item


    Debt Relief; low-income countries; access to financial markets; concessionality.;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance


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