Will World Bank and IMF Lending Lead to HIPC IV? Debt Déjà-Vu All Over Again

Benjamin Leo

No 193, Working Papers from Center for Global Development

Abstract: Four years ago, the G-7 pushed through an unprecedented initiative forcing the international financial institutions to cancel 100 percent of their outstanding debt claims on the world’s poorest countries. Through the Multilateral Debt Relief Initiative (MDRI), these heavily indebted poor countries (HIPCs) stand to receive up to $60 billion in debt relief over time. Moreover, the World Bank, African Development Bank, and IMF shareholders approved a new debt sustainability framework to govern future lending decisions and prevent the need for yet another round of systemic debt relief. All parties emerged from these landmark agreements confident that the dragon of unsustainable debt finally had been slain. However, several unsettling trends raise serious questions about the finality of these actions. First, World Bank and AfDB lending disbursement volumes to these very same HIPC countries remain very high, and nearly the same as compared to pre-MDRI. Emergency IMF lending in response to the global economic crisis has compounded the situation. Second, IMF and World Bank growth projections for HIPCs remain overly rosy compared to actual and historical performance. Our new dataset of IMF growth projections suggests a structural optimism of at least one percentage point per year. Third, HIPCs continue to experience significant volatility in country performance measures that has a direct impact on their ability to carry debt sustainably. Taken together, these findings suggest that donor countries should re-examine the issue of debt sustainability in low-income countries and the system for determining the appropriate grant/loan mix. The upcoming IDA and AfDF replenishment negotiations present a timely opportunity to do so. Absent assertive and corrective action, the international community may be faced with the prospect of a HIPC IV agreement in the not too distant future.

Keywords: lending; hipc; debt relief; cgd; center for global development (search for similar items in EconPapers)
Pages: 21 pages
Date: 2009-11
New Economics Papers: this item is included in nep-dev
References: Add references at CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://www.cgdev.org/content/publications/detail/1423285
Our link check indicates that this URL is bad, the error code is: 403 Forbidden (http://www.cgdev.org/content/publications/detail/1423285 [301 Moved Permanently]--> https://www.cgdev.org/content/publications/detail/1423285)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cgd:wpaper:193

Access Statistics for this paper

More papers in Working Papers from Center for Global Development Contact information at EDIRC.
Bibliographic data for series maintained by Publications Manager ().