Working Paper
Debt Relief and Growth

This paper discusses some issues on how to evaluate the impact of HIPC debt relief in the cases of Tanzania and Zambia using two computable general equilibrium models.

Within our relatively simple model framework, we found that the macroeconomic impact of debt relief is modest. One reason for this relatively modest impact is that the annual injection of additional resources relative to current actual debt service is small in both cases, which implies that the impact of debt relief per se would be expected to be modest.

However, as illustrated in the case of Tanzania the impact could be considerably higher if additional public investment succeeds to improve private sector productivity.