What Motivates Lending and Aid to the Hipcs?
Centro Studi Luca d'agliano No. 189
34 Pages Posted: 27 Feb 2005
Date Written: October 2004
We examine both grants and net loans made to low income countries during the last two decades to understand the main reasons that motivated the behaviour of both donors and creditors. We find that the total amount of net transfers to HIPCs, as compared to non-HIPCs, have been increasing with their debt level. Greater net transfers have taken the form of net loans from multilateral organisations and grants in exchange for loans from bilateral institutions. This evidence thus suggests that HIPCs have kept receiving large amounts of resources just because of their high indebtedness, thereby supporting both the hypothesis of defensive lending and defensive granting.
Keywords: Debt relief, Foreign aid, Highly indebted poor countries
JEL Classification: C23, F34, F35, O19
Suggested Citation: Suggested Citation