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The World's Poorest Countries: Debt Relief or Aid?

Aug 2003
Stanford King Center on Global Development Working Paper
By  Serkan Arslanalp, Peter Blair Henry

Debt relief is unlikely to stimulate investment and growth int eh nations being considered for debt relief under the highly indebted poor countries (HIPCs) initiative. This is because the HIPCs do not suffer from debt overhang. The principal obstacle to investment and growth in the HIPCs is a lack of the basic infrastructure that forms the foundation for profitable economic activity—property rights, roads schools, hospitals, and clean water. The energy and resources currently devoted to the HIPC debt relief initiative could be more efficiently employed as direct foreign aid.