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Abstract
The World Bank and IMF's debt relief framework, the Heavily Indebted Poor Country (HIPC) Initiative is increasingly criticised for not providing sufficient debt relief to enable low-income countries to achieve short term, let alone medium term, debt sustainability. This paper argues that the key weaknesses of the HIPC Initiative stem from its use of an inappropriate analytical criterion when making debt sustainability analyses. The paper, therefore, proposes an alternative approach more suited to countries that are highly vulnerable to economic shocks and beset by widespread and deeply entrenched levels of poverty. This alternative human development approach should be used not only for determining appropriate levels of debt service, but also as the basis for a comprehensive financing strategy for low-income countries that encompasses aid and new borrowing. It argues that debt relief in support of domestically-owned poverty reduction strategies is the most efficient and effective form of resource transfer. In the last section, the paper responds to creditors' resistance to going further with debt relief by addressing creditor objections and urging the wider adoption of some existing African proposals as a way forward.
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- 95Kb ~ 1 min (14 pages)
