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Dynamic fiscal impact of the debt relief initiatives on african heavily indebted poor countries (HIPCs)

Danny Cassimon (), Marin Ferry (), Marc Raffinot and Bjorn Van Campenhout

No DT/2013/01, Working Papers from DIAL (Développement, Institutions et Mondialisation)

Abstract: (english) After two debt relief initiatives launched in 1996 (the Heavily Indebted Poor Countries, HIPC Initiative) and in 1999 (The enhanced HIPC initiative), the G7 decided to go further by cancelling the remaining multilateral debt for these HIPC countries through the Multilateral Debt Relief Initiative (MDRI, 2005). A few papers tried to assess the desired fiscal response effects of those initiatives. This paper uses an extended dataset and alternative econometric techniques in order to tackle methodological issues as endogeneity and fixed effects. We found that debt relief and especially the enhanced HIPC initiative have had a positive impact on the total domestic revenue and the public investment (as percentages of the GDP). Thanks to our large observation span, we also observed that the MDRI led to a significant additional improvement of the level of public investment and domestic revenues ratio, although these effects are smaller than the HIPCs ones. _________________________________ (français) Après deux initiatives de réduction de dette (PPTE I fin 1996 et PPTE II en 1999), le G7 décida d’annuler la totalité de la dette multilatérale (Initiative d’Annulation de la Dette Multilatérale, IADM en 2005). Quelques travaux ont essayé d’évaluer l’impact de ces mesures sur les finances publiques des pays bénéficiaires. Ce travail utilise une base de données plus étendue et des méthodes économétriques alternatives pour tenir compte de l’endogénéïté et des effets fixes. Nous trouvons que les réductions de dette (en particulier l’initiative PPTE II) ont eu un impact positif sur la pression fiscale et sur les investissements publics (en pourcentage du PIB). Grâce à l’extension de la période d’étude, nous observons également que l’IADM a un effet similaire, quoique moins persistent.

Keywords: HIPC; MDRI; Debt relief; Fiscal revenue; Public investment; Fiscal response. (search for similar items in EconPapers)
JEL-codes: H20 H54 H63 O55 F34 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2013-01
New Economics Papers: this item is included in nep-afr, nep-pbe and nep-pub
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Persistent link: https://EconPapers.repec.org/RePEc:dia:wpaper:dt201301

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