Debt Dynamics and Contingency Financing: Theoretical Reappraisal of the HIPC Initiative

As the plight of low-income developing countries in the protracted debt crisis has caught the heart of millions, a worldwide campaign by civil society activists and NGOs for more substantial or total debt cancellation is gathering momentum. In response to the growing demand for effective debt relief measures, governments of G7 and multilateral lending institutions have placed much of their credentials in the HIPC I and II Initiatives. Indeed, by the mid-1990s, it had become clear for creditors of official debt that the repeated debt rescheduling, which has been undertaken through the traditional forum of the Paris Club negotiations since the 1970s, was approaching deadlock. The need for radical measures for writing off bilateral and multilateral official debt finally surfaced as an open agenda on the negotiating table in 1996.