Hiccups for HIPCs

Craig Burnside and Domenico Fanizza
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Domenico Fanizza: IMF

Macroeconomics from University Library of Munich, Germany

Abstract: In this paper we discuss monetary and fiscal policy issues facing heavily-indebted poor countries (HIPCs) who receive debt reduction via the enhanced HIPC initiative. This debt relief program is distinguished from previous ones by its conditionality: freed resources must be used for poverty reduction. We argue that (i) this conditionality limits the extent to which the initiative relaxes the government's lifetime budget constraint; (ii) depending on the response of monetary policy to an increase in social spending there could be a short-run increase in inflation in HIPC countries and (iii) the keys to long-run fiscal sustainability in the HIPCs are significant fiscal reforms by their governments, and the effectiveness of their poverty reduction programs in raising growth.

Keywords: debt relief; HIPC; lifetime budget constraint; aid (search for similar items in EconPapers)
JEL-codes: E (search for similar items in EconPapers)
Date: 2003-05-06
Note: Type of Document - PDF; prepared on IBM PC; to print on Any;
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https://econwpa.ub.uni-muenchen.de/econ-wp/mac/papers/0305/0305004.pdf (application/pdf)

Related works:
Working Paper: Hiccups for HIPCs? (2004)
Working Paper: Hiccups for HIPCs? (2001)
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpma:0305004

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