The Selectivity Versus Conditionality Debate: The HIPC Initiative Perspective
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| Year of publication | 2009 |
| Type | Conference abstract |
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| Description | During the last few years, many of the least developed countries including those in Africa made a huge socioeconomic leap forward. The HIPC Initiative and other debt relief mechanisms have slashed debt ratios in the region, creating room for higher social spending and necessary infrastructural investment. Many now fear that the positive development of the past few years is in jeopardy. The trend of sovereign debt reduction may be reversed as the impact of the global crisis kicks in. Governments may feel the need to scale up foreign lending to create space for anticrisis interventions. However, that might send their debt burdens on an unsustainable path unless new debt is adequately managed and its funds efficiently used. The HIPC Initiative contains mechanisms intended to ensure this. But their setup has attracted a considerable criticism over the years. While some argue that conditions embedded in the HIPC Initiative are too stringent and more countries should be allowed to participate, others fear that such move would jeopardy the very goal of the initiative, permanent exit from debt problems many HIPCs face. Such debate is closely linked to a more general developmental controversy, the selectivity versus conditionality debate. The goal of the paper is to assess the adequacy of conditions attached to HIPC Initiatives debt relief to see whether they contribute to ensuring a long term debt sustainability of countries involved. The paper first discusses the adequacy of conditions on debt relief. Then it examines whether they have brought about the desired policy changes deemed to ensure debt sustainability. Finally, it assesses whether, from this perspective, the current lending poses any significant threat. The paper will also conclude whether the evidence from the HIPC Initiative speaks for more conditionality or on the other hand, for more selectivity. |
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