Debt Relief: The Day After, Financing Low-Income Countries

Grégory Donnat () and Anna Tykhonenko ()
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Grégory Donnat: Université Côte d’Azur

No 2023.13, Working Papers from International Network for Economic Research - INFER

Abstract: In this paper, we investigate the factors of external public indebtedness for Low-Income Countries (LICs) and, as a modeling technique, we employ the iterative Bayesian shrinkage procedure to handle the differences between countries in panel data. Some LICs have benefited from two debt relief programs, the Heavily Indebted Poor Countries (HIPC) initiatives and the Multilateral Debt Relief Initiative (MDRI). We explore whether these debt reductions affect the access to external financing and credit markets of HIPCs. First, our estimation method highlights various debt dynamics across LICs from 1988 to 2018. Second, our results highlight a change in the relationships between external public indebtedness and its factors after the HIPC and MDRI. Unlike past debt reductions, most HIPCs keep borrowing, mainly from private creditors, even if the debt-to-GDP ratio increases. HIPCs’ access to credit markets does not suffer from a potential risk-aversion on the part of lenders, and is facilitated by their attractiveness to private investors.

Keywords: Debt Relief; external financing; low-income countries; Bayesian shrinkage estimator (search for similar items in EconPapers)
JEL-codes: H (search for similar items in EconPapers)
Pages: 47 pages
Date: 2023
New Economics Papers: this item is included in nep-cfn, nep-fdg and nep-ifn
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https://infer-research.eu/wp-content/uploads/2023/10/WP2023.13.pdf First version, 2023 (application/pdf)

Related works:
Working Paper: Debt Relief: The Day After, Financing Low-Income Countries (2023)
Working Paper: Debt Relief: The Day After, Financing Low-Income Countries (2023)
Working Paper: Debt Relief: The Day After, Financing Low-Income Countries (2022)
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