Debt Relief Under the Heavily Indebted Poor Countries Initiative

How does debt relief help poor countries and the poor?

Debt relief is part of a larger effort to address the development needs of low-income countries. For debt reduction to have a tangible impact on poverty, the additional money needs to be spent on programs that benefit the poor. Before the HIPC Initiative, on average, eligible countries were spending slightly more on debt service than on health and education combined. Since the initiative, they are spending about five times more on health, education, and other social services than on debt service.

For the 36 countries receiving debt relief, debt service paid declined by about 1.5 percentage points of GDP between 2001 and 2015. More recently, with the increase in public debt in low-income countries, debt service burdens have started to rise, although they still remain 1 percentage point below the pre-HIPC levels in 2017.