Working Paper: CEPR ID: DP3297
Authors: Nancy Birdsall; Stijn Claessens; Ishac Diwan
Abstract: In this Paper we focus on the question: Will the HIPC debt reduction program help in the transformation of the development assistance business and change the rules of the ?debt game? in Africa? We concentrate on the donor and official creditor side, by exploring how the growing debt of African countries, over the last two decades, has affected the provision of new resources by the donor community. Our results indicate, if debt levels are reduced sufficiently in high debt countries, that donors can shift from the current pattern of non-selectivity and defensive lending to a low debt regime ? a regime that has in the past allowed selectivity in lending in relation to levels of poverty and quality of policy.
Keywords: debt relief; foreign aid; international organizations; low-income countries
JEL Codes: F34; F35; O11; O19
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Reducing debt levels in high-debt countries (H63) | Enable donors to shift from nonselective to selective lending practices (F34) |
| Enable donors to shift from nonselective to selective lending practices (F34) | Beneficial for poverty reduction and effective development assistance (F35) |
| Reducing debt levels in high-debt countries (H63) | Increased net transfers to countries with better governance and policy frameworks (H87) |
| Historical patterns of donor behavior (D64) | Defensive lending (G21) |
| Defensive lending (G21) | Undermine effectiveness of future aid (F35) |