Can Debt Relief Buy Growth?

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Executive Summary

This paper investigates whether the numerous debt relief initiatives during the 1990s have had a significant effect on economic growth rates in developing countries. The major initiatives during that time period were negotiated as bilateral agreements under the guidance of the Paris Club of Creditors. These agreements were followed up by the Heavily Indebted Poor Countries (HIPC) debt relief initiative in 1996 and its "enhanced" version in 1999 under the guidance of the World Bank and the International Monetary Fund. The author finds that, on average, debt relief had no effect on growth rates of developing countries. However, the effect on growth rates differed for different subsets of developing countries.

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