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Ms. Christina Daseking and Mr. Robert Powell

debt rescheduled in the calculation of the PV of debt reduction reflects the fact that concessional reschedulings of the Paris Club have offered individual creditors the choice between two main options, considered broadly equivalent in PV terms. The debt reduction option involves an up-front reduction of the consolidated amount (i.e., the amount of debt payments being treated) and a rescheduling of the remaining debt at market rates (i.e., without further PV relief). The debt-service reduction option, on the other hand, contains no element of direct forgiveness but

Ms. Christina Daseking and Mr. Robert Powell
The low-income country debt crisis had its origins in weak macroeconomic policies, and official creditors’ willingness to take risks unacceptable to private lenders. Payments problems were initially addressed through nonconcessional reschedulings and new lending that maximized financing while containing the budgetary costs for creditors. This led to an unsustainable buildup in debt stocks. More recently, debt ratios have improved, reflecting both adjustment and substantial debt relief. The paper estimates debt relief initiatives since 1988 have cost creditors at least $30 billion, and possibly much more. This compares with the estimated costs of about $27 billion under the enhanced HIPC Initiative.