From Toronto Terms to the HIPC Initiative: A Brief History of Debt Relief for Low-Income Countries
IMF Working Papers, October 1, 1999
Source details
- Canonical URL
- From Toronto Terms to the HIPC Initiative: A Brief History of Debt Relief for Low-Income Countries
Other formats
Bibliographic details
- Authors: Christina Daseking, Robert Powell
- Published: October 1, 1999
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451856231.001
Overview and historical origins
- The low-income country debt crisis originated in weak macroeconomic policies and official creditors’ willingness to take risks unacceptable to private lenders.
- Initial responses to payments problems:
- Nonconcessional reschedulings.
- New lending that maximized financing while containing the budgetary costs for creditors.
- These early responses led to an unsustainable buildup in debt stocks.
Evolution of debt ratios and relief measures
- More recent developments show improved debt ratios, reflecting both macroeconomic adjustment and substantial debt relief.
- The paper provides an historical account tracing developments from the Toronto Terms era through the adoption of the HIPC Initiative.
Cost estimates and comparisons
- The paper estimates debt relief initiatives since 1988 have cost creditors at least $30 billion, and possibly much more.
- This estimated cost is compared with the estimated costs of about $27 billion under the enhanced HIPC Initiative.
Key findings and emphases
- Origins: Weak macroeconomic policies combined with official creditor practices were central to the crisis.
- Policy mechanism effects: Nonconcessional reschedulings and new lending mitigated immediate payment problems but contributed to long-term debt unsustainability.
- Outcome: Debt ratios have improved due to a mix of adjustment policies and debt relief initiatives.
- Quantitative emphasis: Exact cost comparisons are highlighted—"$30 billion" (debt relief initiatives since 1988) versus "about $27 billion" (enhanced HIPC Initiative).
Subjects and keywords (as provided)
- Subjects: Asset and liability management, Debt reduction, Debt relief, Debt rescheduling, Debt service, External debt, Financial institutions, Stocks
- Keywords: cash flow, debt forgiveness, debt reduction, Debt reduction, Debt relief, Debt rescheduling, Debt service, discount rate, External Debt, Global, HIPCs, Low-Income Countries, Paris LIC Paris Club, present value, PV reduction, reduction option, Stocks, WP