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Towards HIPC 2.0? Lessons from Past Debt Relief Initiatives for Addressing Current Debt Problems

Author

Listed:
  • Essers Dennis

    (Economics and Research Department, National Bank of Belgium, 1000 Brussel, Belgium)

  • Cassimon Danny

    (Institute of Development Policy (IOB), University of Antwerp, Antwerp, Belgium)

Abstract

When the COVID-19 pandemic added to already elevated debt vulnerabilities in low-income countries, the G20 launched the Debt Service Suspension Initiative (DSSI) and the Common Framework for Debt Treatments beyond the DSSI, which have provided limited relief so far. For several countries, deeper and more wide-ranging debt treatments will likely be needed to secure future debt sustainability. This paper looks at the Heavily Indebted Poor Countries (HIPC) initiative, the largest and most comprehensive debt relief effort for low-income countries to date, as a potential reference point for the 2020s. While the HIPC initiative appears to have been a qualified success, its replication in the current context would be infeasible and undesirable. Creditor base heterogeneity justifies a more flexible, differentiated approach to debt restructuring. Yet, the HIPC experience holds valuable lessons. “Delay and replay” tendencies should be avoided. Involving commercial creditors is a real challenge, requiring carrots and sticks. And imposing extra conditionality on debt relief proceeds could be helpful but should not be overdone. Even if the Common Framework is unlikely to suffice in case of a systemic debt crisis, its inter-creditor dialogue could perhaps serve as the basis for a more inclusive advisory body or forum for debt restructuring.

Suggested Citation

  • Essers Dennis & Cassimon Danny, 2022. "Towards HIPC 2.0? Lessons from Past Debt Relief Initiatives for Addressing Current Debt Problems," Journal of Globalization and Development, De Gruyter, vol. 13(2), pages 187-231, December.
    • Handle: RePEc:bpj:globdv:v:13:y:2022:i:2:p:187-231:n:4
    DOI: 10.1515/jgd-2021-0051
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    Cited by:

    1. Silvia Marchesi & Tania Masi & Pietro Bomprezzi, 2024. "Is to Forgive to Forget? Sovereign Risk in the Aftermath of Private or Official Debt Restructurings," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 72(1), pages 292-334, March.
    2. Raffaele De Marchi, 2022. "Public debt in low-income countries: current state, restructuring challenges and lessons from the past," Questioni di Economia e Finanza (Occasional Papers) 739, Bank of Italy, Economic Research and International Relations Area.

    More about this item

    Keywords

    public debt; debt relief; Heavily Indebted Poor Countries initiative; Debt Service Suspension Initiative; G20 Common Framework;
    All these keywords.

    JEL classification:

    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • F63 - International Economics - - Economic Impacts of Globalization - - - Economic Development
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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