The HIPC Initiative in Bolivia

Abstract

ABSTRACT This paper examines the Bolivian experience with regard to debt relief through the HIPC Initiative. It has been agreed in principle that the debt-relief funds will be channelled to municipal governments in order to strengthen the decentralization process and to secure maximum poverty reduction. If everything goes according to the plan, the HIPC Initiative could have a substantial effect on poverty in Bolivia. However, the entire project builds on some very optimistic assumptions regarding the performance of the Bolivian economy during the next 18 years. If these assumptions do not hold, Bolivia will not reach the target debt/export ratio of 150. Worse, if the country's economic performance does not live up to expectations, investment projects (roads, schools, hospitals, etc.) may remain half-finished, and unable to be maintained, because the central government cannot deliver the funds that donors have obliged them to commit to the municipalities as a condition of debt relief.