Low Income Countries and External Financing: Does Debt Relief Change Anything ?
DIAL - Working Paper n°2016-16 - Novembre 29016 - with Marc Raffinot (LeDA, DIAL) and Baptiste Venet (LeDA, DIAL)
DIAL - Working Paper n°2016-16 - Novembre 29016 - with Marc Raffinot (LeDA, DIAL) and Baptiste Venet (LeDA, DIAL)
Abstract
Low Income Countries (LICs) have a very limited access to international financial markets. Since the 90's, LICs have been granted debt relief by bilateral creditors and by international financial institutions. Did those debt relief initiatives lead official and private creditors to adjust their lending policy for benefiting countries? This is the question this paper addresses using Difference-in-Differences methodology. Findings tend to show that official lenders tighten their financing policy for HIPCs, shortening grace and maturity periods and reducing the grant element on new loans once debt relief has been provided. We also find that benefiting governments manage to diversify their financing sources by increasing loans to private creditors after they complete the HIPC process and benefit from additional debt cancellations under the MDRI.
Low Income Countries (LICs) have a very limited access to international financial markets. Since the 90's, LICs have been granted debt relief by bilateral creditors and by international financial institutions. Did those debt relief initiatives lead official and private creditors to adjust their lending policy for benefiting countries? This is the question this paper addresses using Difference-in-Differences methodology. Findings tend to show that official lenders tighten their financing policy for HIPCs, shortening grace and maturity periods and reducing the grant element on new loans once debt relief has been provided. We also find that benefiting governments manage to diversify their financing sources by increasing loans to private creditors after they complete the HIPC process and benefit from additional debt cancellations under the MDRI.
