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Fiscal Sustainability in African HIPC Countries: A Policy Dilemma?

Author/Editor: Fedelino, Annalisa | Kudina, Alina
Authorized for Distribution: September 1, 2003
Electronic Access: Free Full Text (PDF file size is 988KB)
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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 looks at the link between fiscal policy and debt sustainability in a number of African countries participating in the Heavily Indebted Poor Countries (HIPC) Initiative. The paper finds that, on the basis of current fiscal policies, debt levels will remain unsustainable even after these countries graduate from the HIPC Initiative. This finding has important policy implications. By the very requirements of the HIPC Initiative, these countries are expected to increase significantly their poverty-reducing expenditure-possibly resulting in weaker fiscal primary balances and worsening debt sustainability outlook. As offsetting fiscal tightening may not be viable, ensuring debt sustainability may thus require increased availability of (nondebt-creating) grants. Otherwise, debt sustainability in HIPC countries may prove elusive in the long term.
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Series: Working Paper No. 03/187
Subject(s): Debt relief | HIPC Initiative | Concessional aid
Author's keyword(s): Debt Sustainability; HIPC Initiative; concessional financing
    Published:   September 1, 2003        
    ISBN/ISSN:   1934-7073   Format:   Paper
    Stock No:   WPIEA1872003   Pages:   27
    Price:   US$15.00 (Academic Rate: US$12.00 )
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