Hiccups for Hipcs?

42 Pages Posted: 2 Dec 2004

See all articles by A. Craig Burnside

A. Craig Burnside

Duke University - Department of Economics; University of Glasgow - Department of Economics; National Bureau of Economic Research (NBER)

Domenico Fanizza

International Monetary Fund (IMF) - Middle East and Central Asia Department

Date Written: November 2004

Abstract

In this paper we discuss fiscal and monetary policy issues facing heavily-indebted poor countries (HIPCs) who receive debt reduction via the enhanced HIPC initiative. This debt relief program is distinguished from previous ones by its conditionality: freed resources must be used for poverty reduction. We argue that (i) this conditionality severely limits the extent to which the initiative provides significant debt relief; (ii) depending on the response of monetary policy to an increase in social spending there could be a short-run increase in inflation in HIPC countries and (iii) the keys to long-run fiscal sustainability in the HIPCs are significant fiscal reforms by their governments, and the effectiveness of their poverty reduction programs in raising growth.

Suggested Citation

Burnside, Craig and Fanizza, Domenico, Hiccups for Hipcs? (November 2004). NBER Working Paper No. w10903, Available at SSRN: https://ssrn.com/abstract=618585

Craig Burnside (Contact Author)

Duke University - Department of Economics ( email )

213 Social Sciences Building
Box 90097
Durham, NC 27708-0204
United States

University of Glasgow - Department of Economics

Adam Smith Building
Glasgow, Scotland G12 8RT
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Domenico Fanizza

International Monetary Fund (IMF) - Middle East and Central Asia Department ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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