The HIPC Initiative and China’s Emergence as a Lender: post hoc or propter hoc?

IMF Working Papers, January 31, 2025

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Twenty years after the Heavily Indebted Poor Countries (HIPC) debt relief initiative, debt levels in low-income countries are rising again, renewing sustainability concerns.
Prevailing narrative: China and other emerging lenders exploited the HIPC initiative to expand lending.
Using a synthetic control method to generate a counterfactual, the authors find:
- China and other emerging lenders reduced net lending after debt relief.
- Only multilateral creditors increased net lending after debt relief.
- No support for the claim that debt relief encouraged lending to political allies.
Overall conclusion: Debt relief seems to have had limited influence on subsequent lending patterns.

Analytical approach: Synthetic control method used to generate a counterfactual to assess lending behavior following HIPC debt relief.

Subject: Asset and liability management, Debt burden, Debt relief, Debt service, External debt
Keywords: Africa, China, China's emergence, Debt burden, debt forgiveness, Debt relief, debt relief initiative, Debt service, Geoeconomics, Global, HIPC debt relief, International lending, MDRI debt relief, Sovereign debt