Download Free Analytical Aspects Of The Debt Problems Of Heavily Indebted Poor Countries Book in PDF and EPUB Free Download. You can read online Analytical Aspects Of The Debt Problems Of Heavily Indebted Poor Countries and write the review.

June 1996 A group of heavily indebted low-income countries (HIPCs), most in Sub-Saharan Africa, has continued to experience external debt problems. Because the HIPCs' economic characteristics and external imbalances are very different from those of middle-income countries, the analysis of debt problems and debt-reduction must be modified and complemented in important ways. Therefore, the authors revisit the methodological issues underlying debt sustainability analysis, as well as theory and empirical evidence on how large debts affect economic performance. Their main question is: Should consideration be given to more upfront debt reduction for HIPCs, over and above that provided under current mechanisms, or should debts continue to be refinanced, subject to conditionality? Ongoing refinancing with conditionality reduces moral hazard and gives countries an incentive to maintain good policies. However, this approach entails transition costs, can create uncertainty, may lack credibility, and can impede local ownership of reform programs. Upfront debt reduction can create moral hazard problems and may weaken the incentives for maintaining sound policy. There are theoretical arguments about why a high level of debt can impede investment and policy reform. Although empirical evidence concerning the hypothesis that HIPCs suffer significant adverse effects from their large debt overhang is inconclusive, evidence from middle-income countries suggests that debt reduction can benefit an economy if the policy environment is right. Whether there should be further debt reduction for specific heavily indebted low-income countries depends on the facts for each case and requires quantitative analysis of data about different forces at play in the countries involved.
A group of heavily indebted low-income countries (HIPCs), most in Sub-Saharan Africa, has continued to experience external debt problems. Because the HIPCs' economic characteristics and external imbalances are very different from those of middle-income countries, the analysis of debt problems and debt-reduction must be modified and complemented in important ways. Therefore, the authors revisit the methodological issues underlying debt sustainability analysis, as well as theory and empirical evidence on how large debts affect economic performance. Their main question is: Should consideration be given to more upfront debt reduction for HIPCs, over and above that provided under current mechanisms, or should debts continue to be refinanced, subject to conditionality? Ongoing refinancing with conditionality reduces moral hazard and gives countries an incentive to maintain good policies. However, this approach entails transition costs, can create uncertainty, may lack credibility, and can impede local ownership of reform programs. Upfront debt reduction can create moral hazard problems and may weaken the incentives for maintaining sound policy. There are theoretical arguments about why a high level of debt can impede investment and policy reform. Although empirical evidence concerning the hypothesis that HIPCs suffer significant adverse effects from their large debt overhang is inconclusive, evidence from middle-income countries suggests that debt reduction can benefit an economy if the policy environment is right. Whether there should be further debt reduction for specific heavily indebted low-income countries depends on the facts for each case and requires quantitative analysis of data about different forces at play in the countries involved.
In 1996 the World Bank and the International Monetary Fund, in response to a call from the leaders of the major industrial nations for a comprehensive approach to the debt problems of the poorest countries, proposed the Heavily Indebted Poor Countries (HIPC) Debt Initiative. The initiative reflects concerns of creditors, including the U.S., that, even after receiving debt relief through existing mechanisms, some poor countries will have debt burdens that remain too large relative to their ability to pay. This report: (1) describes the implementation of the HIPC initiative and (2) assesses the initiative's potential to achieve its stated goal. Charts and tables.
Theoretical models predict that countries with unchanged long-run savings preferences will respond to debt relief by running up new debts or by running down assets. And there are some signs that incremental debt relief over the past two decades has fulfilled those predictions. Debt relief is futile for countries with unchanged long-run savings preferences.
Pursuant to a congressional request, GAO reviewed the: (1) implementation of the Heavily Indebted Poor Countries (HIPC) Debt Initiative; and (2) initiative's potential to achieve its stated goal of bringing poor countries' debts to sustainable levels. GAO noted that: (1) the HIPC initiative will help reduce participating poor countries' debt burdens, in some cases, substantially; however, many will remain vulnerable to future debt problems even with sound economic policies; (2) the implementation of the HIPC initiative reflects compromise among the major official creditors on issues such as countries' eligibility and the total amount of debt relief to be provided; (3) in recognition of countries' economic vulnerablities, creditors have generally agreed on relief amounts that are at or close to the upper bounds of what the negotiated framework allows; (4) nonetheless, in order to avoid further debt problems, countries receiving debt relief through the HIPC initiative are assumed to maintain strong economic performance and continue to receive large amounts of donor assistance; (5) in most cases this assistance includes balance-of-payments support; (6) the HIPC initiative projections assume that countries will maintain sustainable debt levels in part through strong export growth; (7) these export growth assumptions may be optimistic for some countries; and (8) since many HIPC recipients rely upon a few commodities for their export earnings, they are particularly vulnerable to economic events such as a decline in the price or output of a primary export.
After a massive international campaign calling attention to the development impact of foreign debt, the Heavily Indebted Poor Countries (HIPC) initiative is now underway. But will the HIPC Initiative meet its high expectations? Will debt relief substantially raise growth? How do we make sure that debt relief benefits poor people? And how can we ensure that poor countries do not become highly indebted again? These are some of the key policy issues covered in this rigorous and independent analysis of debt, development, and poverty.