Beyond Hipc: Secure Sustainable Debt Relief for Poor Countries

25 Pages Posted: 26 Mar 2008

See all articles by Nancy Birdsall

Nancy Birdsall

Center for Global Development

Brian Deese

BlackRock, Inc

Multiple version iconThere are 2 versions of this paper

Date Written: September 27, 2004

Abstract

In 1999, the United States and other major donor countries supported an historic expansion of the heavily indebted poor country (HIPC) debt relief initiative. HIPC had two primary goals: reduce poor countries' debt burdens to levels that would allow them to achieve sustainable growth; and promote a new way of assisting poor countries focused on home-grown poverty alleviation and human development. Three years after the initiative came into existence, we are beginning to see the apparent impact that HIPC is having, particularly on recipient countries' ability and willingness to increase domestic spending on education and HIV/AIDS programs. Yet it has also become clear that the HIPC program is not providing a sufficient level of predictability or sustainability to allow debtor countries (and donors) to reap the larger benefits, particularly in terms of sustained growth and poverty reduction, originally envisioned. An adequate amount of predictable debt relief can be an extremely efficient way of transferring resources to poor countries with reasonable economic management (indeed, more effective than traditional aid). But the full benefits of the transfer, in improved capacity to manage their economies, and in increased investor confidence in an economy's future, require that creditors, investors and committed recipient government officials have confidence that the improved debt situation will be sustained over the medium term. After reviewing some of the main critiques and proposals for change, we offer here a new way forward - a proposal to deepen, widen, and most importantly insure debt relief to poor countries. We focus on the insurance aspect of our proposal, that would safeguard countries against external shocks for a decade, and on the advantages of financing such insurance by limited mobilization of IMF gold. We see this proposal as a practical way to make debt relief more predictably sustainable in HIPC countries, and a proposal around which international donors could consolidate their efforts in the near term.

Keywords: foriegn aid, debt relief, economic development

Suggested Citation

Birdsall, Nancy and Deese, Brian, Beyond Hipc: Secure Sustainable Debt Relief for Poor Countries (September 27, 2004). Center for Global Development Working Paper No. 46. Available at SSRN: https://ssrn.com/abstract=1112780 or http://dx.doi.org/10.2139/ssrn.1112780

Nancy Birdsall (Contact Author)

Center for Global Development ( email )

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Brian Deese

BlackRock, Inc

55 East 52nd Street
New York City, NY 10055
United States

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