Transcript Ms. Nancy Birdsall

Debt Relief: A Risk Management
Failure?
(or: You may be in shock but . . .)
External Debt Panel
1 December 2008, Doha
NANCY BIRDSALL
THE CENTER FOR GLOBAL DEVELOPMENT
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
Low Income*
GDP per capita
(constant 2000 US$)
External Debt, total
(% of GNI)
Infant Mortality
(per 1,000 live births)
International Aid
(% of GNI)
P-C HIPC
Middle Income
354.49
442.26
2,318.30
69.65
55.50
26.80
79.59
82.73
26.04
14.56
14.47
34.62
Source: Author, using WDI 2008 data; *LICs excluding India; Low and Middle Income
classification by World Bank standards
Aid (% of GNI):
Post-Completion-Point HIPCs, 2006
Aid/GNI by HIPC Classification
30
Aid/GNI (percent)
25
20
15
10
5
0
Pre-Decision-Point
Interim
Post-Completion-Point
Source: Author, using WDI 2008 data
Aid (% of GNI):
Post-Completion Point HIPCs, 2006
30
Aid/GNI (percent)
25
20
15
10
5
0
Source: Author, using WDI 2008 data
Total Debt Service (% of GNI):
Post-Completion Point HIPCs, 2006
Total Debt Service (% of GNI)
9
8
7
6
5
4
3
2
1
0
Source: Author, using WDI 2008 data
External Debt (% of GNI), 2006
External Debt (% of GNI) by HIPC
Classification
160
140
120
100
80
60
40
20
0
Pre-Decision-Point
Interim
Post-Completion-Point
Source: Author, using WDI 2008 data
External Debt, Total (% of GNI):
Post-Completion Point HIPCs, 2006
External Debt, Total (% of GNI)
160
140
120
100
80
60
40
20
0
Source: Author, using WDI 2008 data; excluding Sao Tome and Principe (296%) for scaling
Terms of Trade Volatility, 1975-2005
Volatility by Income Level
0.18
0.16
0.14
0.12
0.1
0.08
0.06
0.04
0.02
0
Low Income
Middle Income
High Income
Source: Calderon (2007) in Perry (2008)
Terms of Trade Shock Frequency, 1975-2005
Shock frequency by Income Level
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
Low Income
Middle Income
High Income
Source: Calderon (2007) in Perry (2008)
Natural Disasters Frequency, 1975-2005
Natural Disasters Frequency
by Income Level and CAC*
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
Low Income
Middle Income
High Income
CAC
*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: reserves
 Market 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?