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The External Debt Problem in Central America: Honduras, Nicaragua, and the HIPC Initiative

Gerardo Esquivel; Felipe Larraín B.; Jeffrey D. Sachs

Title:
The External Debt Problem in Central America: Honduras, Nicaragua, and the HIPC Initiative
Author(s):
Esquivel, Gerardo
Larraín B., Felipe
Sachs, Jeffrey D.
Date:
Type:
Reports
Department(s):
Earth Institute
Persistent URL:
Series:
Development Discussion Paper
Part Number:
645
Geographic Area:
Honduras
Nicaragua
Notes:
Published in Economic Development in Central America, vol 1, Growth and Internationalization (Cambridge: Harvard University Press, 2001).
Publisher:
Harvard Institute for International Development
Publisher Location:
Cambridge, Mass.
Abstract:
This paper reviews the foreign debt burden in Central America with special emphasis on Honduras and Nicaragua, which have a large debt overhang. Several indicators suggest that this foreign debt seriously impedes economic growth in both nations. Honduras and Nicaragua, the poorest countries of Central America, have lagged behind the rest of the region in growth, resulting in an increase in regional income inequality during the 1990s. Analysis suggests that Honduras and Nicaragua require alleviation of their foreign debt as a prerequisite to sustained growth. This paper also evaluates the prospects of these countries to qualify for the new initiative aimed at reducing the debt burden of the highly indebted poor countries (the so-called HIPC Initiative). It concludes that Honduras and Nicaragua have favorable prospects of qualifying for the HIPC Initiative. In general, both countries meet the eligibility criteria. Honduras and Nicaragua face a higher foreign debt burden than three countries that have already qualified for HIPC treatment. The main obstacle, however, is demonstrating successful macroeconomic performance under the supervision of the IMF. The paper ends with a discussion of the strategy that these countries should follow in order to achieve maximum debt relief.
Subject(s):
Managerial economics
Finance
Economics
Latin Americans
Item views
502
Metadata:
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Suggested Citation:
Gerardo Esquivel, Felipe Larraín B., Jeffrey D. Sachs, , The External Debt Problem in Central America: Honduras, Nicaragua, and the HIPC Initiative, Columbia University Academic Commons, .

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