How sustainable is African HIPCs’ debt after debt relief?

The debt overhang literature does not provide conclusive answers or evidence as to what sustainable debt levels are. A recent IMF Working Paper supports the claim that, on the basis of current fiscal policies, debt levels will remain unsustainable in many African HIPCs even after they graduate from the HIPC Initiative (Fedelino and Kudina, 2003). Another recent study by Kraay and Nehru (2003), corroborated by the IMF staff’s empirical analysis (see IMF and World Bank, 2004b), finds strong evidence that institutions and policies, as well as external shocks, are important in determining the levels of debt at which countries experience distress. As discussed in the previous chapter, the assessment of debt sustainability is, by its nature, a forward-looking concept and inherently probabilistic.

Sustainable Development Goals:

Decent Work and Economic Growth

Reduced Inequalities

Partnerships for the Goals