Africa: Out of debt, into fiscal space? Dynamic Fiscal Impact of the Debt Relief Initiatives on African Heavily Indebted Poor Countries (HIPCs)

Danny Cassimon, Bjorn van Campenhout, Marin Ferry () and Marc Raffinot
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Bjorn van Campenhout: IFPRI - International Food Policy Research Institute [Washington] - CGIAR - Consultative Group on International Agricultural Research [CGIAR]
Marin Ferry: LEDa - Laboratoire d'Economie de Dauphine - IRD - Institut de Recherche pour le Développement - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique, LEDA-DIAL - Développement, Institutions et Modialisation - LEDa - Laboratoire d'Economie de Dauphine - IRD - Institut de Recherche pour le Développement - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique

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Abstract: 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 (most of) the remaining multilateral debt for these HIPC countries through the Multilateral Debt Relief Initiative (MDRI, 2005). Building on earlier literature that tries to assess the fiscal response effects of HIPC debt relief, we extend this assessment by explicitly including the fiscal response effects of MDRI debt relief, and by using an extended dataset and alternative econometric techniques, in order to have sufficient hindsight and better tackle methodological issues such as country specific effects. We confirm earlier findings that debt relief, and especially the enhanced HIPC initiative, has had a positive impact on recipient country total domestic revenue and public investment (as percentage of GDP). Additionally, thanks to our large observation span, we also observe that the MDRI led to a significant increase in current primary expenditures and domestic revenue ratios, although these effects are on average smaller than the HIPC Initiative ones.

Keywords: Debt relief; Public investment; Fiscal response; HIPC; MDRI; Fiscal revenue (search for similar items in EconPapers)
Date: 2015
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Published in International Economics, 2015, 144, pp.29-52. ⟨10.1016/j.inteco.2015.04.007⟩

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Journal Article: Africa: Out of debt, into fiscal space? Dynamic fiscal impact of the debt relief initiatives on African Heavily Indebted Poor Countries (HIPCs) (2015)
Journal Article: Africa: Out of debt, into fiscal space? Dynamic fiscal impact of the debt relief initiatives on African Heavily Indebted Poor Countries (HIPCs) (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01489473

DOI: 10.1016/j.inteco.2015.04.007

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