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The Prospects For Foreign Debt Sustainability In Post-Completion Point Countries: Implications Of The HIPC-MDRI Framework

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  • Jacinta Nwachukwu

Abstract

The Enhanced HIPC Initiative was launched in 1999 to reduce the NPV of poor country foreign debt to a sustainable threshold of 150 percent of their exports. This paper applies a simple growth-with-debt model to sixteen post-completion point HIPCs to assess whether or not this goal will be met by 2015. Our somewhat optimistic base case projections suggest that participation in the current Enhanced HIPC-MDRI initiative will only reduce the NPVs of their external debt as a whole to 176 percent of exports by this date. Sensitivity tests which expose these countries to adverse exogenous shocks help draw attention to policies that could ensure that unsustainable debt levels are not again accumulated by the world’s poorest countries.

Suggested Citation

  • Jacinta Nwachukwu, 2008. "The Prospects For Foreign Debt Sustainability In Post-Completion Point Countries: Implications Of The HIPC-MDRI Framework," Global Development Institute Working Paper Series 2608, GDI, The University of Manchester.
    • Handle: RePEc:bwp:bwppap:2608
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    Cited by:

    1. Joshua C. Hall, Serkan Karadas and Minh Tam T. Schlosky, 2018. "Is There Moral Hazard in the Heavily Indebted Poor Countries (HIPC) Initiative Debt Relief Process?," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 43(3), pages 1-24, September.
    2. Minh Tam Schlosky & Andrew Young, 2017. "Can foreign aid motivate institutional reform? An evaluation of the HIPC Initiative," Journal of Entrepreneurship and Public Policy, Emerald Group Publishing Limited, vol. 6(2), pages 242-258, August.
    3. William Akoto, 2013. "The HIPC Initiative: What Affects Duration?," Economics Bulletin, AccessEcon, vol. 33(1), pages 372-378.

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