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Does Lower Debt Buy Higher Growth? The Impact of Debt Relief Initiatives on Growth
Author:
Ms. Sandra Marcelino
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and
Ms. Ivetta Hakobyan
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Series:
IMF Working Papers
Volume/Issue:
Volume 2014: Issue 230
Language:
English
Publication Date:
18 Dec 2014
DOI:
https://doi.org/10.5089/9781498369671.001
ISBN:
9781498369671
ISSN:
1018-5941
Pages:
41
Keywords:
WP; debt; HIPCs; HIPC LIC; HIPC Initiative; Debt relief; Growth; Investment; CP HIPCs; HIPC debt relief; HIPC case; debt relief Initiatives; efforts to low-income countries; Debt burden; Debt sustainability; Public investment spending; Global
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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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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.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund
Volume 2014: Issue 230