nancy birdsall the center for global development debt relief: a risk management failure? (or: you...
TRANSCRIPT
NANCY BIRDSALLTHE CENTER FOR GLOBAL DEVELOPMENT
Debt Relief: A Risk Management Failure?
(or: You may be in shock but . . .)
External Debt Panel1 December 2008, Doha
The message, in summary form
To address vulnerability – structural and episodic:
Simplify the rule that determines access to IDA grants (vs. loans)
Create a contingency facility that delays debt service or otherwise relieves debt in the event of an external shock to a post completion point HIPC
Debt and Other Indicators for Low Income, Post-Completion Point HIPC, and Middle Income countries, 2006
Source: Author, using WDI 2008 data; *LICs excluding India; Low and Middle Income classification by World Bank standards
Low Income* P-C HIPCMiddle Income
GDP per capita(constant 2000 US$)
354.49 442.26 2,318.30
External Debt, total(% of GNI)
69.65 55.50 26.80
Infant Mortality(per 1,000 live births)
79.59 82.73 26.04
International Aid(% of GNI)
14.56 14.47 34.62
Aid (% of GNI):Post-Completion-Point HIPCs, 2006
Source: Author, using WDI 2008 data
Aid (% of GNI):Post-Completion Point HIPCs, 2006
Source: Author, using WDI 2008 data
Total Debt Service (% of GNI):Post-Completion Point HIPCs, 2006
Source: Author, using WDI 2008 data
External Debt (% of GNI), 2006
Source: Author, using WDI 2008 data
External Debt, Total (% of GNI):Post-Completion Point HIPCs, 2006
Source: Author, using WDI 2008 data; excluding Sao Tome and Principe (296%) for scaling
Terms of Trade Volatility, 1975-2005
Source: Calderon (2007) in Perry (2008)
Terms of Trade Shock Frequency, 1975-2005
Source: Calderon (2007) in Perry (2008)
Natural Disasters Frequency, 1975-2005
*Central America and the Caribbean
Source: Calderon (2007) and Gurenko (2007) in Perry (2008)
Responses to volatility and risk
Coping after the fact: pro-cyclical fiscal adjustment; more aid
Prevention in the first place: stabilization funds; export diversification
Self-insurance: reservesMarket and market-like insurance (missing
option for LICs)
What’s been missing in aid “architecture”
Two proposals:
Response to structural vulnerability: IDA grants for countries under $800(?) income per capita and subsidies to make IMF financing grant-equivalent
Response to episodic external shocks: a LIC contingency or insurance facility, probably housed at IMF – automatic and timely – that would allow more borrowing under current DSF . . .
In conclusion
HIPC debt relief, for all its success, has failed to reduce high vulnerability of poor countries – structural and episodic
But there is still hope . . . . . fixes to HIPC rules could lead the way on fixes to aid transfers overall
Who’s accountable? Who’s in charge?