Policy Briefs

The existing framework for sovereign debt workouts is often described as a ‘non-system’, a loose mix of Paris Club arrangements for official debts, voluntary renegotiations with commercial creditors, and more ambitious but, ultimately, temporary schemes for debt relief such as the Heavily Indebted Poor Country (HIPC) initiative. With sovereign debt crises looming in a range of countries, the question of how such crises should be confronted is again growing louder. Whereas most would agree that the current framework for sovereign debt workouts needs reform, opinions on the design of the reform diverge widely. This policy brief outlines a number of initiatives that are currently under way or on the table and discusses their main advantages and drawbacks. (Download).

D. Cassimon

At the completion of the Heavily Indebted Poor Countries (HIPC) initiative and the Multilateral Debt Relief Initiative (MDRI), eligible countries’ public debt sustainability was restored. In view of large development needs (and limited tax revenues), it is only rational that former HIPCs accumulate new debt. To monitor the debt sustainability of low-income countries (LICs) over the longer term, the World Bank and IMF jointly developed the Debt Sustainability Framework (DSF). In this policy brief we explain how the DSF works, discuss the different creditor policies the output of the DSF informs, and highlight a number of critiques on the framework. (Download).

D. Cassimon

Since 1972, the donors of the Development Assistance Committee (DAC) of the OECD measure Official Development Assistance (ODA) to determine which expenditures are sufficiently development related to be considered as aid. While the definition has in the intervening decades come under close scrutiny and repeated criticism, it has only been marginally adapted. Recently however, the controversy about the ODA definition has heated up. The fact for instance that some donors have been able to include (download)

D. Cassimon

A criticism that is frequently levelled against the current pattern of aid allocation is the coexistence of 'aid darlings' and 'aid orphans' among recipient countries. It subsists in spite of the coming to the fore of a new approach to development cooperation that emphasized policy dialogue, country ownership and the need to get rid of conditionalities and reform overload or high transaction costs. Heralded by the Paris Declaration (March 2005) and the Accra Agenda for Action (September 2008), this approach also privileged new aid modalities (Download). 

J-P Platteau