Health Expenditures Under the HIPC Debt Initiative

One of the goals of the Heavily Indebted Poor Countries (HIPC) debt initiative is to provide additional resources for basic health care to the population of eligible developing countries. In this paper I investigate the effect of debt relief on per capita health expenditure in a sample of developing countries while controlling for other factors used in the literature. I find that debt relief has – at the margin – little or no effect on health expenditure in countries that are classified as HIPC. The level of health expenditures in HIPC countries, however, is significantly higher than in other developing countries. On the other hand, countries not classified as HIPC increase their per capita health expenditures more than proportionally if they receive debt relief. This result is surprising considering that per capita amounts of debt relief provided to HIPC countries are on average significantly higher than those to Non-HIPC countries.