HIPC Debt Relief and Policy Reform Incentives

Jean-Claude Berthélemy

No DP2001-105, WIDER Working Paper Series from World Institute for Development Economic Research (UNU-WIDER)

Abstract: In this paper, I discuss the incentives that the HIPC Initiative could create in debtor countries in favour of economic adjustment and reform. The usual debt-overhang argument, stating that debt relief will increase the net benefits of reforms, needs to be revisited in this context. First, the HIPC Initiative does not provide pure debt relief, but also creates new public spending obligations on poverty reduction programmes. Second, not all HIPCs can be considered as enjoying good economic governance, while the debt-overhang argument assumes a welfare-maximizing government.

Keywords: Public debt; Public expenditures; Fiscal policy; Poverty; Public administration (search for similar items in EconPapers)
Date: 2001
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