Beyond HIPC: What are the Prospects for Debt Sustainability?

Abstract

: The pronouncement by the G-8 Summit at Gleneagles in July 2005 on debt cancellation under the HIPC Initiative, affirmed by the G-8 Ministers of Finance in Washington in September, should signal the beginning of debt relief for the world's heavily indebted poor countries (HIPC), mostly African. It is expected that debt cancellation should return the beneficiary countries to debt sustainability and afford their governments the fiscal space to invest in basic infrastructure and social services. Countries could significantly enhance their prospects for maintaining debt sustainability mainly by adopting debt management strategies that de-emphasize excessive borrowing, checking the expansion of unproductive public sector activities and the associated fiscal deficits, financial restructuring to reduce the bias against autonomous capital flows, and taking deliberate actions to expand exports.