Debt of the poorest countries: Anatomy of a crisis kept on hold

This paper argues that the twin attributes of public ownership of the heavi ly indebted poor country (HIPC) debt, and the relative systemic irrelevance of these countries' economic performance led to an almost decade-long dela y in the provision of substantial debt relief for these countries. While pr ivate creditors were forced to come to terms with the middle-income country debt, public creditors could afford to sustain the fiction of a liquidity crisis much longer (implying little need for debt reduction). This delay wa s costly for these countries as they fell behind other countries of compara ble income levels in both human and economic development terms. The paper a lso offers some estimates of the size of the debt overhang facing these cou ntries, and hence potential bases for determining the adequacy of current d ebt-reduction efforts.