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Debt Relief, Additionality, and Aid Allocation in Low Income Countries

  • Robert Powell
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    This paper models the resource implications of debt relief provided to low-income countries (LICs). Obtaining debt relief does not necessarily lead to individual aid-dependent countries receiving more overall resources from the donor community. Preliminary cross-section estimates suggest that debt relief provided to low-income countries in the period 1996 2000 neither crowded out other non-debt relief-related aid flows to the debtors concerned nor created significant extra net resources for those countries. While it is too early to fully assess the resource implications of the enhanced HIPC Initiative, this paper provides a possible approach to such an evaluation.

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    Paper provided by International Monetary Fund in its series IMF Working Papers with number 03/175.

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    Length: 22
    Date of creation: 01 Sep 2003
    Date of revision:
    Handle: RePEc:imf:imfwpa:03/175
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    1. Mosley, Paul, 1985. "The Political Economy of Foreign Aid: A Model of the Market for a Public Good," Economic Development and Cultural Change, University of Chicago Press, vol. 33(2), pages 373-93, January.
    2. Enzo Grilli & Markus Riess, 1992. "EC aid to associated countries: distribution and determinants," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 128(2), pages 202-220, June.
    3. Hjertholm, Peter, 2001. "Debt Relief and the Rule of Thumb: Analytical History of HIPC Debt Sustainability Targets," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
    4. Dowling, J. M. & Hiemenz, Ulrich, 1985. "Biases in the allocation of foreign aid: Some new evidence," World Development, Elsevier, vol. 13(4), pages 535-541, April.
    5. Dudley, Leonard & Montmarquette, Claude, 1976. "A Model of the Supply of Bilateral Foreign Aid," American Economic Review, American Economic Association, vol. 66(1), pages 132-42, March.
    6. Jeffrey D. Sachs, 2002. "Resolving the Debt Crisis of Low-Income Countries," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 33(1), pages 257-286.
    7. Gounder, Rukmani, 1994. "Empirical results of aid motivations: Australia's bilateral aid program," World Development, Elsevier, vol. 22(1), pages 99-113, January.
    8. Wall, Howard J., 1995. "The allocation of official development assistance," Journal of Policy Modeling, Elsevier, vol. 17(3), pages 307-314, June.
    9. Kevin Ross & R. Brooks & Robert Powell & Ydahlia A. Metzgen Quemarez & Doris C. Ross & Mariano Cortes & Saqib Rizavi & Benoit Ketchekmen & Francesca Fornasari, 1998. "External Debt Histories of Ten Low-Income Developing Countries: Lessons from Their Experience," IMF Working Papers 98/72, International Monetary Fund.
    10. Claessens, Stijn & Detragiache, Enrica & Kanbur, Ravi & Wickham, Peter, 1996. "Analytical aspects of the debt problems of heavily indebted poor countries," Policy Research Working Paper Series 1618, The World Bank.
    11. Nancy Birdsall & John Williamson, 2002. "Delivering on Debt Relief: From IMF Gold to a New Aid Architecture," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 337.
    12. Cohen, Daniel, 1990. "Debt Relief: Implications of Secondary Market Discounts and Debt Overhangs," World Bank Economic Review, World Bank Group, vol. 4(1), pages 43-53, January.
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