Africa’s H — HIPC

What impact is sovereign debt having on African countries?

February 16, 2005

What impact is sovereign debt having on African countries?

This was the first time that debts to official international financial agencies — such as the World Bank and the International Monetary Fund — were being cancelled.

The intent is to use the savings from debt relief to increase spending on education, health, rural development and improvements in institutional capacity.

In aggregate, social spending is up in the 24 HIPC countries that have received relief. But debt relief does not solve poor countries’ financing problems, because — even after reducing debt service — they remain dependent on grants and concessional loans to fund development programs.

Such assistance has been falling — and, in addition, many poor countries have experienced sharp declines in the prices of commodity exports and rising petroleum import bills.

In some of these countries, debt levels have therefore even increased again, despite HIPC relief.