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Theoretical and empirical foundations of HIPC debt sustainability targets

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  • Peter Hjertholm

Abstract

This article traces the origins of HIPC (Heavily Indebted Poor Country) debt sustainability targets. These targets are interpreted as 'switching values', below which countries are expected to avoid debt service problems but, as such, they do not take into account that countries encounter debt problems for a variety of reasons and at different levels of debt. It is likely that the 'true' switching value of the debt-to-export ratio of many HIPCs lie below the present target. Regarding the 'fiscal window' of the HIPC initiative, the lack of analytical basis for a 250 per cent target for the debt-torevenue ratio is noted, and the problems raised by the joint 'openness-revenue' condition are discussed. The article concludes that the sustainability targets, as presently applied, are not well supported in analytical terms.

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  • Peter Hjertholm, 2003. "Theoretical and empirical foundations of HIPC debt sustainability targets," Journal of Development Studies, Taylor & Francis Journals, vol. 39(6), pages 67-100.
    • Handle: RePEc:taf:jdevst:v:39:y:2003:i:6:p:67-100
    DOI: 10.1080/00220380312331293587
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    Cited by:

    1. Peter Hjertholm, 2004. "Explaining the Enhanced HIPC Initiative: A Response to Michaelowa (2003)," Public Choice, Springer, vol. 121(3), pages 481-483, February.
    2. Chuku Chuku & Mustafa Yasin Yenice, 2021. "Working Paper 356 - Eurobonds, debt sustainability and macroeconomic performance in Africa: Synthetic controlled experiments," Working Paper Series 2482, African Development Bank.
    3. Alvarez-Plata, Patricia & Brück, Tilman, 2008. "External Debt in Post-Conflict Countries," World Development, Elsevier, vol. 36(3), pages 485-504, March.
    4. R.G. Akhmadeev & O.A. Bykanova & N.V. Philippova & I.V. Vashchekina & T.B. Turishcheva, 2018. "Macroeconomic Indicators and their Impact on the Foreign Debt Burden: The Case of BRICS Countries," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(2), pages 68-82.
    5. Melina, Giovanni & Yang, Shu-Chun S. & Zanna, Luis-Felipe, 2016. "Debt sustainability, public investment, and natural resources in developing countries: The DIGNAR model," Economic Modelling, Elsevier, vol. 52(PB), pages 630-649.
    6. Mr. Yibin Mu, 2012. "Striking an Appropriate Balance Among Public Investment, Growth, and Debt Sustainability in Cape Verde," IMF Working Papers 2012/280, International Monetary Fund.
    7. repec:ers:journl:v:vi:y:2018:i:2:p:68-82 is not listed on IDEAS
    8. Cassimon, Denis & Moreno-Dodson, Blanca & Wodon, Quentin, 2008. "Debt Sustainability for Low-Income Countries: A Review of Standard and Alternative Concepts," MPRA Paper 11077, University Library of Munich, Germany.

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