Is debt relief the right way to reach debt sustainability?: An analysis of the HIPC and the Multilateral Debt Relief Initiative [Ist Schuldenerlass der richtige Weg zur Erreichung von Schuldentragf¤higkeit? Eine Analyse der HIPC-Initiative und des multilateralen Schuldenerlasses]

As the high external debt in Low Income Countries (LIC) is mainly caused by structural deficits and exogenous shocks, most LICs will be, in the short and medium term at least, dependent on subsidies from donors. During the previous 10 years donors have offered extensive debt relief to LIC within two initiatives: the Heavily Indebted Poor Countries (HIPC) and the Multilateral Debt Relief Initiative. However, debt relief only addresses the symptoms, not their causes of development barriers. Therefore, within the HIPC-Initiative debt relief is contingent on economic and political reforms. If these poor countries are to reach debt sustainability over the long term, all stakeholders — creditors and debtors alike — have to put in place suitable long-term economic-policy measures. © 2006, List-Gesellschaft e.V.