External Debt, Public Investment, and Growth in Low-Income Countries

By Toan Quoc Nguyen, Benedict J. Clements, Rina Bhattacharya

December 1, 2003

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Toan Quoc Nguyen, Benedict J. Clements, and Rina Bhattacharya. External Debt, Public Investment, and Growth in Low-Income Countries, (USA: International Monetary Fund, 2003) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper examines the channels through which external debt affects growth in low-income countries. Our results suggest that the substantial reduction in the stock of external debt projected for highly indebted poor countries (HIPCs) would directly increase per capita income growth by about 1 percentage point per annum. Reductions in external debt service could also provide an indirect boost to growth through their effects on public investment. If half of all debt-service relief were channeled for such purposes without increasing the budget deficit, then growth could accelerate in some HIPCs by an additional 0.5 percentage point per annum.

Subject: Debt burden, Debt service, External debt, Public debt, Public investment spending

Keywords: Affect growth, GDP, Investment, WP

Publication Details

Pages:

25
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2003/249
Stock No:

WPIEA2492003
ISBN:

9781451875904
ISSN:

1018-5941

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