Debt Relief Initiatives

Arnone and Presbitero analyze the design and the implementation of the Heavily Indebted Poor Countries (HIPC) Initiative, by pointing out its main drawbacks and suggesting a different approach to debt sustainability and debt relief programs. The international community bears large costs to finance debt relief programs, so an efficient use of these resources should require a careful cost-benefit analysis. In particular, the destination of a large share of scarce resources to a limited number of countries. These countries lack the basic infrastructures and institutions to trigger economic growth. This study provides background concepts and a review of recent debt crises in developing countries, focusing on the last decade and providing figures and descriptive evidence of debt accumulation and debt relief in HIPCs. It deals with debt sustainability and analyzes the evolution of domestic debt in developing countries, following the design of the HIPC Initiative. Furthermore, this book looks at the potential effects of domestic debt on economic growth and investigates the possible risks arising from fast-growing internal debt in HIPC countries, selectively reviewing the existing literature and also presenting new evidence.