How much poverty could HIPC reduce

Abstract

This paper reviews the development of the HIPC Initiative, then considers how much poverty could be reduced through debt relief. Using a simple distribution function and measures of inequality, US one dollar a day poverty is estimated for the twenty-three countries. We show that the HIPC countries account for relatively little of developing country poverty. Further, full debt cancellation would have a small impact on reducing poverty in most of the HIPC countries themselves. The paper reaches the conclusion that neither a distribution-neutral debt cancellation, nor transferring all debt payments to investment for faster growth would achieve the International Poverty Targets. Therefore, debt relief must be combined with redistribution measures to achieve those targets.