External Debt, Public Investment, and Growth in Low-Income Countries

Author/Editor:

Toan Quoc Nguyen ; Benedict J. Clements ; Rina Bhattacharya

Publication Date:

December 1, 2003

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper examines the channels through which external debt affects growth in low-income countries. Our results suggest that the substantial reduction in the stock of external debt projected for highly indebted poor countries (HIPCs) would directly increase per capita income growth by about 1 percentage point per annum. Reductions in external debt service could also provide an indirect boost to growth through their effects on public investment. If half of all debt-service relief were channeled for such purposes without increasing the budget deficit, then growth could accelerate in some HIPCs by an additional 0.5 percentage point per annum.

Series:

Working Paper No. 2003/249

Subject:

Debt burden Debt service External debt Public debt Public investment spending

English

Publication Date:

December 1, 2003

ISBN/ISSN:

9781451875904/1018-5941

Stock No:

WPIEA2492003

Pages:

25

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