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Ms. Yan M Sun

, and another 11 countries have not yet reached the decision point. 2 While the external debt stocks of HIPC completion point countries have been reduced substantially, exiting from the HIPC initiative does not, in and of itself, guarantee long-term external debt sustainability. In fact, if structural weaknesses in their economies continue to prevail and macroeconomic management does not improve, completion point countries might well slip back into the debt trap again. For instance, the importance of export diversification has been underscored by the deterioration

Ms. Yan M Sun
This paper examines a number of structural factors affecting the external debt sustainability of HIPC completion point countries. It shows that (i) while comparing favorably with other lowincome countries, the policy and institutional frameworks of completion point countries in general are still relatively weak, and their debt management practices remain inferior to international standards; and (ii) their export base remains narrow and fiscal revenue mobilization lags behind, even compared with many other low-income countries. Achieving and maintaining long-term debt sustainability in completion point countries will require continued structural reforms, timely donor support, and close monitoring of new borrowing in support of sound macroeconomic policies.
Jie Yang and Dan Nyberg

relief is estimated at US$71 billion in end-2007 NPV terms. Nearly half of this cost represents irrevocable debt relief to the 23 countries that have reached completion point. While the external debt stock of HIPC completion point countries has been reduced substantially, exiting from the HIPC Initiative does not guarantee long-term external debt sustainability. Notwithstanding the decline in debt burdens through HIPC debt relief, long-term debt sustainability remains a challenge for many HIPCs. Indeed, of the 23 HIPCs that have reached completion point, only nine

Jie Yang and Dan Nyberg
Despite substantial debt relief to HIPC Initiative completion point countries, long-term debt sustainability remains a challenge. This paper examines a number of structural factors affecting external debt sustainability. It shows that in HIPC completion point countries (i) the export base broadly remains narrow; (ii) fiscal revenue mobilization lags behind in some countries; and (iii) policy and institutional frameworks are still relatively weak. Achieving and maintaining longterm debt sustainability in completion point countries will require continued structural reforms, timely donor support, and close monitoring of new non-concessional borrowing.
Jie Yang and Dan Nyberg

Front Matter Page Finance Department and Asia and Pacific Department Authorized for distribution by Jianhai Lin Contents I. Introduction II. Cross-Country Comparisons of Macroeconomic Performance III. Structural Differences Among HIPC Completion Point Countries A. Export Diversification B. Fiscal Revenue Mobilization C. Governance IV. Concluding Remarks Reference Figures Figure 1: Macroeconomic Stability and Growth in PRGF Countries by Country Groupings Figure 2a: Aggregate Net Transfers by Country Groupings Figure 2b