IMF Working Papers

The HIPC Initiative and China’s Emergence as a Lender: post hoc or propter hoc?

By Tito Cordella, Maia Cufre, Andrea F Presbitero

January 31, 2025

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Format: Chicago

Tito Cordella, Maia Cufre, and Andrea F Presbitero. "The HIPC Initiative and China’s Emergence as a Lender: post hoc or propter hoc?", IMF Working Papers 2025, 033 (2025), accessed March 3, 2025, https://doi.org/10.5089/9798229001366.001

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

Twenty years after the Heavily Indebted Poor Countries (HIPC) debt relief initiative, debt levels in low-income countries are rising again, renewing sustainability concerns. The prevailing view suggests that China and other emerging lenders exploited the HIPC initiative to expand lending. Using a synthetic control method to generate a counterfactual, we find that, contrary to this narrative, China and other emerging lenders reduced net lending after debt relief; only multilateral creditors increased it. Furthermore, we find no support for the claim that debt relief encouraged lending to political allies. Overall, debt relief seems to have had limited influence on subsequent lending patterns.

Subject: Asset and liability management, Debt burden, Debt Relief, Debt service, External debt

Keywords: Africa, China, China's emergence, Debt burden, Debt forgiveness, Debt relief, Debt relief initiative, Debt service, Geoeconomics, Global, HIPC debt relief, International lending, MDRI debt relief, Sovereign debt

Publication Details

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