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

_IMF Working Papers, December 1, 2003_

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## Bibliographic details
- Authors: Toan Quoc Nguyen, Benedict J. Clements, Rina Bhattacharya
- Published: December 1, 2003
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451875904.001

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### Summary
- This paper examines the channels through which external debt affects growth in low-income countries.
- The authors: Toan Quoc Nguyen, Benedict J. Clements, Rina Bhattacharya.
- Publication date: December 1, 2003.
- Key headline result: 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.
- Indirect channel: reductions in external debt service could boost growth through effects on public investment.
- Counterfactual scenario reported: 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.

### Key findings and projections
- Direct effect of debt reduction:
  - Increase in per capita income growth: about 1 percentage point per annum.
- Indirect effect via public investment:
  - If 50 percent of debt-service relief is allocated to public investment without raising the budget deficit, additional growth: 0.5 percentage point per annum in some HIPCs.

### Policy implications and recommendations
- Debt relief that reduces the stock of external debt can have a measurable, direct positive impact on per capita growth.
- Channeling a portion of debt-service relief into public investment, while maintaining fiscal discipline (i.e., without increasing the budget deficit), can produce further growth gains.
- Policy focus on combining debt-service relief with sustained public investment may be particularly beneficial for HIPCs.

### Key statistics and publication identifiers
- Pages: 25
- Volume: 2003
- Issue: 249
- Series: Working Paper No. 2003/249
- DOI: https://doi.org/10.5089/9781451875904.001
- Stock No: WPIEA2492003
- ISBN: 9781451875904
- ISSN: 1018-5941
- Citation format shown in source: Toan Quoc Nguyen, Benedict J. Clements, and Rina Bhattacharya. "External Debt, Public Investment, and Growth in Low-Income Countries", IMF Working Papers 2003, 249 (2003), accessed 8/29/2026, https://doi.org/10.5089/9781451875904.001

*IMF Working Paper No. 2003/249*

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/30/external-debt-public-investment-and-growth-in-low-income-countries-17074_