Public Debt and its Determinants in Low Income Countries - Results from 7 Country Case Studies

Abstract

This paper examines the determinants of public debt dynamics in Low Income Countries (LICs) over the period 1990-2003. Debt dynamics in LICs are influenced not only by macroeconomic variables but also by the composition of debt and the provision of debt relief over time. The study considers a sample of 17 LICs from Africa, Asia and Latin America and reports detailed case studies for 7 LICs, which consider not only the debt dynamics, but also the specific episodes of marked policy change or structural factors that contributed to the accumulation or reduction of total public debt. Debt dynamics over that last 13 years show a high degree of heterogeneity across low income countries, which underscores the importance of country-specific factors. These include the fiscal stance, the structure of the economy, the exchange rate systems, the composition and structure of the debt and debt management policies.