Does Lower Debt Buy Higher Growth? The Impact of Debt Relief Initiatives on Growth

December 18, 2014

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Sandra Marcelino, and Ivetta Hakobyan. Does Lower Debt Buy Higher Growth? The Impact of Debt Relief Initiatives on Growth, (USA: International Monetary Fund, 2014) accessed November 21, 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

In 1996, the IMF and the World Bank introduced the Heavily Indebted Poor Countries Initiative—a comprehensive debt relief program aimed at reducing the external debt burden of eligible countries to sustainable levels, provided they carry out strong programs of macroeconomic adjustment and structural reforms designed to promote growth and reduce poverty. Now that the HIPC Initiative is nearly completed, this paper investigates whether the initiative managed to spur growth, either directly or indirectly through investment. In contrast to earlier studies, we conclude that there is some evidence of positive effects of the HIPC Initiative on growth. Such evidence suggests that the HIPC Initiative and MDRI have helped HIPC-eligible countries to reach higher growth, but it remains unclear whether this is through higher investment or another channel. Also, the analysis illustrates that it is hard to disentangle pure debt-relief effects from other concurrent factors.

Subject: Asset and liability management, Debt burden, Debt relief, Debt sustainability, Expenditure, External debt, Public investment spending

Keywords: CP HIPCs, Debt, Debt burden, Debt relief, Debt relief Initiatives, Debt sustainability, Efforts to low-income countries, Global, Growth, HIPC case, HIPC debt relief, HIPC Initiative, HIPC LIC, HIPCs, Investment, Public investment spending, WP

Publication Details

Pages:

41
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2014/230
Stock No:

WPIEA2014230
ISBN:

9781498369671
ISSN:

1018-5941

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