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 HIPCcompletionpointcountries 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
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.
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.
, and another 11 countries have not yet reached the decision point. 2
While the external debt stocks of HIPCcompletionpointcountries 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
Front Matter Page Finance Department and Asia and Pacific Department
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II. Cross-Country Comparisons of Macroeconomic Performance
III. Structural Differences Among HIPCCompletionPointCountries
A. Export Diversification
B. Fiscal Revenue Mobilization
IV. Concluding Remarks
Figure 1: Macroeconomic Stability and Growth in PRGF Countries by Country Groupings
Figure 2a: Aggregate Net Transfers by Country Groupings
Disbursements and Corrective Actions
1. HIPCCompletionPointCountries in Africa, and Sub-Saharan Africa: Selected Economic and Financial Indicators 1985-2004
2. Selected Indicators of Performance and Millennium Development Goals
3. Program Targets and Outcomes under the 1998-2001 ESAF/PRGF Arrangements
4. Program Targets and Outcomes under the 2002 PRGF Arrangement
5. Selected Economic and Financial Indicators, 1998-2004
6. Compliance with Quantitative Program Targets under the ESAF/PRGF arrangement, 1998-2001; and PRGF arrangement 2002