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As part of our work building capacity in developing country governments, we have prepared a large number of documents which analyse key issues for debt relief and poverty reduction, as well as the analysis of foreign private capital and private sector external debt. You can download each publication on this part of the website.
HIPC Debt Analysis and Strategy
The HIPC Capacity Building Programme
Implementing HIPC II: Key Issues for HIPCs
The Paris Club
Debt Conversions: An Overview
Analysing Domestic Debt Sustainability
Best Practices in Macroeconomic Forecasting
HIPC Capacity Building Needs
Key Analytical Issues for Government External Financing
Foreign Private Capital
Private Sector External Debt: Main Issues and Challenges for Monitoring
Intra-regional Private Capital Flows in Eastern and Southern Africa
Private Capital Flows to Low-income Countries: Perception and Reality
HIPC Debt Analysis and Strategy
The HIPC Capacity Building Programme
By Matthew Martin and Juan Carlos Aguilar
The Heavily Indebted Poor Countries (HIPC) Initiative provides a unique opportunity to depart from past practices of piecemeal and creditor-led debt relief. It allows debtors not only to reduce their external debt burden, but also to analyse their external financial sustainability for the foreseeable future. In this context, (since July 1997) the Governments of Austria, Denmark, Sweden, Switzerland and (since June 1998) the United Kingdom have been funding the HIPC Debt Strategy and Analysis Capacity-Building Programme (henceforth CBP). The aim of this programme is to allow HIPC governments to develop the full independent capacity to undertake their own debt strategy analysis, to maximise their ownership and leadership of national debt strategy, and to demonstrate to the donor and creditor community their commitment to a high level of debt management during and beyond the HIPC Initiative.
This paper presents the objectives and methodology of the CBP, which includes demand assessment missions, regional and national debt strategy workshops, follow-up missions, senior policy seminars and HIPC Ministerial Network. It also discusses the progress achieved in transferring CBP activities to regional organisations.
Implementing HIPC II: Key Issues for HIPCs
By Matthew Martin, Alison Johnson and Juan Carlos Aguilar
This paper focuses on key issues which Governments of the Heavily Indebted Poor Countries (HIPC) need to examine when analysing their own debt sustainability and implementing the Enhanced HIPC Initiative. It is designed to provide HIPC debt managers with information on the technical aspects of debt analysis, essential to doing debt sustainability analysis and preparing a national debt strategy. It covers the following issues:
The Paris Club
By Juan Carlos Vilanova and Matthew Martin
The Paris Club, founded in Paris in 1956, is an informal group of creditor countries with no permanent members who function under the principle of general consensus and burdensharing. The Paris Club's real influence was not felt until the 1980s and the early 1990s, with the occurrence of the debt crisis in most of the world's developing countries. Nowadays, the Paris Club is one of the most important debt relief fora for the world's poorest countries, and one of the essential steps in the HIPC Initiative.
This paper is a practioner's guide to the Paris Club. In addition to setting out the preconditions and principal elements of the Paris Club negotiations, it focuses on the rescheduling terms, their evolution and an explanation of how they are applied to concessional bilateral aid debt and non-concessional bilateral debt, including the distinction between Options A and B. It also discusses the implementation of the Cologne Terms for 90% debt relief and additional creditor pledges of debt cancellation.
Debt Conversions: An Overview
By Melissa Moye
Debt conversions involve the cancellation of debt in exchange for new obligations with different repayment terms. First introduced in the 1980s, there are now a range of debt conversion mechanisms, including debt-for-equity, debt buybacks, debt-for-nature and debt-for-development swaps. This paper provides a guide to these mechanisms, explaining in detail how they function as well as highlighting their advantages and disadvantages. It also explains the debt reduction and debt sales programmes of a Paris Club agreement and provides information on country experiences and examples of debt conversion agreements.
Analysing Domestic Debt Sustainability
By Alison Johnson
While the HIPC Initiative is focused on the sustainability of external debt, it is just as important for governments to assess the sustainability of domestic debt. This paper focuses on the key issues for analysing domestic debt sustainability and designing scenarios for domestic debt relief and new borrowings. It covers the following issues:
Best Practices in Macroeconomic Forecasting
By Matthew Martin
Macroeconomic forecasting is crucial to long-term analysis of development policy and debt sustainability. This paper analyses the problems with forecasting methods and makes recommendations for how to improve forecasting techniques in low-income countries, based on international and regional best practices used by many countries. The paper covers technical problems relating to the lack of reliable and timely data and existing international and country specific economic models. It then looks at key methods for forecasting all the main line items of the balance of payments, budget, monetary and financial and real sectors. Finally, it examines institutional structures and technical assistance/capacity building needed to improve macro forecasting in low-income countries.
HIPC Capacity Building Needs
By Juan Carlos Aguilar and Matthew Martin
Debt Relief International (DRI) is the executing agency for the HIPC Debt Strategy Analysis Capacity-Building Programme, an inter-governmental programme funded by the governments of Austria, Denmark, Sweden, Switzerland and United Kingdom. Under its programme, DRI assesses the demands of the HIPC country for assistance and agrees with the HIPC government on measures to be taken by the HIPC government itself, in eight areas, all of which are essential to full national leadership of the HIPC process:
This paper discusses the methodology for assessing national capacity and the ranking criteria and system used by DRI.
Key Analytical Issues for Government External Financing
By Matthew Martin and Alison Johnson
To achieve long-term debt sustainability, HIPC Governments not only need to design and implement the best possible strategy for debt relief, but they also need to design and implement a national strategy for external assistance for poverty reduction. To do so, HIPC governments need to assess the costs, conditionalities, predictability and risks for each type of new financing. In addition, it is also important to analyse a country’s experience of external assistance, how it has been delivered and the constraints to this delivery, as well as its impact on the macroeconomy and for poverty reduction spending.
This paper focuses on the key issues HIPC governments need to examine, when analysing their options for new external assistance and designing an external assistance strategy, under the following headings:
Until recently and with a few exceptions, such as the Philippines and Zimbabwe, governments and central banks had devoted little emphasis or resources to addressing privates sector external debt (PSED). Similarly, since the introduction of computerised debt recording and management systems in the early 1980’s, they have focused on public and publicly-guaranteed external debt. This was understandable, as this category of debt was the most significant cause of the debt crises that erupted, and international initiatives were mainly directed to alleviating its burden. In the broader context of private external flows, the main focus was on foreign direct investment, as it was the most significant private flow. Thus monitoring and analysing PSED has had a relatively low priority.
Recent experiences, however, have highlighted the need to place more importance on monitoring PSED. This paper discusses the major issues and is intended to alert debt managers to the key challenges in developing and strengthening monitoring systems. It covers why more attention is now being given to monitoring PSED, what is meant by PSED, how monitoring it differs from monitoring public and publicly-guaranteed external debt, and how it depends significantly on the exchange regime. It also makes recommendations on the key factors that have to be considered in developing and strengthening monitoring systems.
Intra-regional Private Capital Flows in Eastern and Southern Africa
By Lynne Thomas and Jonathan Leape, CREFSA and Nils Bhinda and Matthew Martin, DFI
Private capital flows to Africa increased substantially in the 1990s, and opportunities for intra-regional investment have expanded. Promotion of cross-border investment within the region is an important component of integration initiatives. However, trade and exchange control liberalisation alone will not be sufficient to encourage greater levels of cross-border capital flows. Policies at the macro and microeconomic level are required to create an environment conducive to private investment. Understanding and responding to factors influencing investment decisions will be crucial. But to fully understand the determinants of foreign capital flows it is necessary to have in place adequate systems for collecting, compiling and disseminating statistics on capital movements.
This paper presents the findings of a joint research and capacity-building project on intra-regional private capital flows in Eastern and Southern Africa coordinated by Development Finance International and the LSE Centre for Research into Economics and Finance in Southern Africa, with teams of officials from Mozambique, South Africa, Tanzania, Uganda, Zambia and Zimbabwe. The project generated new data on regional capital flows and on factors influencing investment decisions. This paper summarises the findings of studies by each participating country, and draws together methodological and institutional recommendations for further developing capacity for monitoring and analysing private capital flows.
Private Capital Flows to Low-income Countries: Perception and Reality / Chapter 2 of the Canadian Development Report 2004
By Matthew Martin with Cleo Rose-Innes
Based on phase I of the FPC CBP, DFI was asked to contribute Chapter 2 of the Canadian Development Report 2004, produced by the North-South Institute.
Until recently, low-income countries have been perceived as receiving virtually no private foreign capital. Yet many low-income countries have long known the reality: that low-income countries with stable economies and open investment policies have received extremely large flows, which have caused currency crises and macroeconomic instability.
This article presents the reality of large private capital flows to low-income countries. It is based on projects executed by Development Finance International in collaboration with 18 countries, funded by the participating governments themselves, and by the governments of Denmark, Sweden, Switzerland and the United Kingdom.
The article examines the nature and composition of foreign private capital in these countries; why the flows are occurring (including investor perceptions from both domestic and foreign direct investors) the implications for government policy; and the need for capacity building in low-income countries to monitor and analyse foreign private capital.
