Debt relief for low income countries: Is it effective and efficient?

Abstract

This paper implicity assumes that there is a role for development assistance and it has little to say about the first question. Instead, it focuses on the second question and systematically explores the key issues surrounding debt relief as a way of providing development assistance.2 Throughout, an attempt is made to keep a sharp distinction between rhetoric and reality. Again, much of the popular discussion surrounding debt relief mixes them up. While this may bring attention to the issue, in the long run it does not assist in designing appropriate policy. The ultimate objectives of development assistance are to help bring about economic, social and human development in poor countries by encouraging long-term economic growth and poverty reduction. This paper investigates whether assistance offered in the form of debt relief can help to deliver these objectives and whether it can deliver them better than conventional foreign aid. Is debt relief, in other words, more effective and efficient? Our aim is to provide a measured assessment of the issues surrounding debt relief rather than to adopt a particular point of view.