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Debt Relief: The Day After, Financing Low-Income Countries

Author

Listed:
  • Anna Tykhonenko

    (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis (1965 - 2019) - CNRS - Centre National de la Recherche Scientifique - UniCA - Université Côte d'Azur)

  • Donnat Grégory

    (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis (1965 - 2019) - CNRS - Centre National de la Recherche Scientifique - UniCA - Université Côte d'Azur)

Abstract

In this paper, we investigate the factors of external public indebtedness for Low-Income Countries (LICs) and, as a modeling technique, we employ the iterative Bayesian shrinkage procedure to handle the differences between countries in panel data. Some LICs have benefited from two debt relief programs, the Heavily Indebted Poor Countries (HIPC) initiatives and the Multilateral Debt Relief Initiative (MDRI). We explore whether these debt reductions affect the access to external financing and credit markets of HIPCs. First, our estimation method highlights various debt dynamics across LICs from 1988 to 2018. Second, our results highlight a change in the relationships between external public indebtedness and its factors after the HIPC and MDRI. Unlike past debt reductions, most HIPCs keep borrowing, mainly from private creditors, even if the debt-to-GDP ratio increases. HIPCs' access to credit markets does not suffer from a potential risk-aversion on the part of lenders, and is facilitated by their attractiveness to private investors.

Suggested Citation

  • Anna Tykhonenko & Donnat Grégory, 2023. "Debt Relief: The Day After, Financing Low-Income Countries," Working Papers hal-04298784, HAL.
    • Handle: RePEc:hal:wpaper:hal-04298784
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    JEL classification:

    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy

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