Fiscal Policy Case Study

Case Title:

Heavily Indebted Poor Countries' Debt: Should it be Written Off?

Abstract:
The world's 137 poorest nations owe a total of $2.6 trillion in international debt, and these countries on an average spend 25% of their national budget in repaying the debt, depleting the countries' resources to invest in infrastructure, education, healthcare and other social programmes. Fearing that debt repayment will rob these countries of their future, a number of policy makers and international activist groups called on the lenders to write off the debt of the poor countries. On the other hand, multilateral lenders like the International Monetary Fund (IMF) and the World Bank cited that debt cancellation was not beneficial for the financial health of the international creditors and it might hurt the poor countries more than helping them. Instead, the Heavily Indebted Poor Countries' (HIPC) debt initiative was launched with the objective to cut the debt of 38 heavily indebted poor countries to sustainable levels.

Pedagogical Objectives:

• To discuss the HIPC initiative in writing off debt for the economic development of poor countries.

Keywords : Highly Indebted Poor Countries (HIPC), HIPC Initiative, Debt write off, Debt cancellation, International debt, Debt rescheduling, Poverty reduction, Debt relief, International Monetary Fund (IMF), Fiscal Policy Case Study, World Bank, Paris Club, Americas Millennium Challenge Corp