The Impact of External Indebtednesson Poverty in Low-Income Countries

Kadima Kalonji, Boileau Loko, Raj Nallari and Montfort Mlachila

No 2003/061, IMF Working Papers from International Monetary Fund

Abstract: This paper explores the relationship between external debt and poverty. A number of observers have argued that high external indebtedness is a major cause of poverty. Using the first-differenced general method of moments (GMM) estimator, the paper models the impact of external debt on poverty, measured by life expectancy, infant mortality, and gross primary enrollment rates, while duly taking into account the impact of external debt on income. The paper thus endeavors to bring together the literature that links external debt with income growth and poverty. The main conclusion is that once the effect of income on poverty has been taken into account, external indebtedness indicators have a limited but important impact on poverty.

Keywords: WP; GDP; poverty indicator; crowding out; Poverty; Growth; External Debt; poverty-growth nexus; crowding-out effect; debt indicator; Laffer debt curve; real purchasing power; Debt burden; Debt service; Sub-Saharan Africa (search for similar items in EconPapers)
Pages: 26
Date: 2003-03-01
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Citations: View citations in EconPapers (21)

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