This is a revised version of the paper originally prepared for the UNU/WIDER development conference
on Debt Relief, Helsinki, 17-18 August 2001.
UNU/WIDER gratefully acknowledges the financial contribution fro m the governments of Denmark,
Finland and Norway to the 2000-2001 Research Programme.
Discussion Paper No. 2001/100
Does the HIPC Initiative Achieve
its Goal of Debt Sustainability.
Bernhard G. Gunter *
This paper examines the question if the Heavily Indebted Poor Country (HIPC)
Initiative provides a good basis for the HIPCs to exit from repeated debt rescheduling.
Building on other reviews of the HIPC Initiative, the paper begins with a short summary
of some key problems of the HIPC Initiative. It then reviews critically the growth
assumptions of HIPC debt sustainability analyses, whereby the paper examines the
changes in (i) public and private capital flows before and after the adoption of the HIPC
Initiative, (ii) investment and savings rates, and (iii) sectoral transformations. The last
analytical part explores the appropriateness of the HIPC debt sustainability indicators.
Before summarizing the main results, the paper makes some suggestions on possible
modifications in the HIPC framework that are more likely to provide debt sustainability
than the current framework.
Keywords: debt sustainability, structural change, growth
JEL classification: F34, O11, F35