Fiscal Sustainability in African HIPC Countries: A Policy Dilemma?

September 1, 2003

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Annalisa Fedelino, and Alina Kudina. Fiscal Sustainability in African HIPC Countries: A Policy Dilemma?, (USA: International Monetary Fund, 2003) accessed November 23, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper looks at the link between fiscal policy and debt sustainability in a number of African countries participating in the Heavily Indebted Poor Countries (HIPC) Initiative. The paper finds that, on the basis of current fiscal policies, debt levels will remain unsustainable even after these countries graduate from the HIPC Initiative. This finding has important policy implications. By the very requirements of the HIPC Initiative, these countries are expected to increase significantly their poverty-reducing expenditure-possibly resulting in weaker fiscal primary balances and worsening debt sustainability outlook. As offsetting fiscal tightening may not be viable, ensuring debt sustainability may thus require increased availability of (nondebt-creating) grants. Otherwise, debt sustainability in HIPC countries may prove elusive in the long term.

Subject: Debt sustainability, Exchange rate adjustments, External debt, Fiscal policy, Fiscal stance, Foreign exchange

Keywords: Concessional financing, Creating flow, Debt level, Debt problem, Debt ratio, Debt sustainability, Debt-sustainability target, Exchange rate, Exchange rate adjustments, Fiscal stance, GDP ratio, HIPC completion point, HIPC Initiative, Sub-Saharan Africa, Sustainability threshold, WP

Publication Details

Pages:

28
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2003/187
Stock No:

WPIEA1872003
ISBN:

9781451859539
ISSN:

1018-5941

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