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Fiscal Sustainability in African HIPC Countries: A Policy Dilemma?
Author:
Ms. Annalisa Fedelino
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and
Alina Kudina null

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Series:
IMF Working Papers
Volume/Issue:
Volume 2003: Issue 187
Language:
English
Publication Date:
01 Sep 2003
DOI:
https://doi.org/10.5089/9781451859539.001
ISBN:
9781451859539
ISSN:
1018-5941
Pages:
28
Keywords:
WP; exchange rate; Debt sustainability; HIPC Initiative; concessional financing; GDP ratio; HIPC completion point; sustainability threshold; debt level; debt ratio; debt-sustainability target; debt problem; creating flow; Fiscal stance; Exchange rate adjustments; Sub-Saharan Africa
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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.
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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.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund