What has 100 Billion Dollars Worth of Debt Relief Done for Low-Income Countries?

60 Pages Posted: 11 Oct 2005  

Nicolas Depetris Chauvin

Princeton University - Department of Economics; Inter-American Development Bank (IADB)

Aart Kraay

World Bank - Development Research Group (DECRG)

Date Written: September 2005

Abstract

Between 1989 and 2003, low-income countries received $100 billion in debt relief. The stated objectives for much of this debt relief have been to reduce debt overhang and to free up recipient government resources for development spending that would otherwise have been used for debt service. In this paper, we empirically assess the extent to which debt relief has been successful in meeting these objectives, using a newly-constructed database measuring the present value of debt relief for 62 low-income countries. We find little evidence that debt relief has affected the level and composition of public spending in recipient countries. We also do not find evidence that debt relief has raised growth, investment rates or the quality of policies and institutions among recipient countries. Although we cannot rule out the possibility that our failure to find evidence of positive impacts of debt relief is due to a variety of data and statistical problems, the evidence reported here does suggest that some skepticism is in order regarding the likely benefits of further large-scale debt relief.

Keywords: Debt relief, HIPC, low-income countries, debt

JEL Classification: F0, F3

Suggested Citation

Depetris Chauvin, Nicolas and Kraay, Aart, What has 100 Billion Dollars Worth of Debt Relief Done for Low-Income Countries? (September 2005). Available at SSRN: https://ssrn.com/abstract=818504 or http://dx.doi.org/10.2139/ssrn.818504

Nicolas Depetris Chauvin

Princeton University - Department of Economics ( email )

Princeton, NJ 08544-1021
United States

HOME PAGE: http://www.princeton.edu/~depetris

Inter-American Development Bank (IADB) ( email )

1300 New York Avenue NW
Washington, DC 20577
United States

Aart Kraay (Contact Author)

World Bank - Development Research Group (DECRG) ( email )

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States
202-473-5756 (Phone)
202-522-3518 (Fax)

HOME PAGE: http://econ.worldbank.org/staff/akraay

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