Nicaragua and the HIPC initiative: The tortuous journey to debt relief

This paper examines Nicaragua's experience with the Enhanced HIPC Initiativ e. Particular attention is paid to the country's experience leading up to t he decision point of the Initiative, the magnitude of resource flows result ing from debt relief, and the attitudes of various sectors of the populatio n to debt relief. The research reported here indicates that, though the HIP C Initiative will result in a substantial reduction in Nicaragua's foreign debt, the expected amount of debt forgiveness does not match, either in ter ms of magnitude or implied discount, some earlier debt reduction operations . Further, the flow of debt relief envisaged would represent a less than 20 % enhancement of recent aid flows. While there is general support in Nicara gua for debt reduction and the associated public consultation, what is seen as a top-down, overly limited, and hasty consultation process has come in for severe criticism from several sectors of Nicaraguan society. Beyond deb t relief, many Nicaraguans view greater access to developed-country markets , and more innovative and coordinated approaches to development financing, as indispensable to long-term poverty reduction.