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What Has 100 Billion Dollars Worth of Debt Relief Done for Low- Income Countries?

Nicolas Depetris Chauvin and Aart Kraay ()

International Finance from EconWPA

Abstract: Between 1989 and 2003, low-income countries received $100 billion in debt relief. The stated objectives for much of this debt relief have been to reduce debt overhang and to free up recipient government resources for development spending that would otherwise have been used for debt service. In this paper we empirically assess the extent to which debt relief has been successful in meeting these objectives, using a newly-constructed database measuring the present value of debt relief for 62 low-income countries. We find little evidence that debt relief has affected the level and composition of public spending in recipient countries. We also do not find evidence that debt relief has raised growth, investment rates or the quality of policies and institutions among recipient countries. Although we cannot rule out the possibility that our failure to find evidence of positive impacts of debt relief is due to a variety of data and statistical problems, the evidence reported here does suggest that some skepticism is in order regarding the likely benefits of further large-scale debt relief.

Keywords: Debt Relief; HIPC; Low-Income Countries; Debt (search for similar items in EconPapers)
JEL-codes: F3 F4 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-afr and nep-dev
Date: 2005-10-02
Note: Type of Document - pdf; pages: 60
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpif:0510001

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