Heavily Indebted Poor Countries - Criticism

Criticism

Critics soon began to attack HIPC's scope and its structure. First, they criticized HIPC's definition of debt sustainability, arguing that the debt-to-export and debt-to-government-revenues criteria were arbitrary and too restrictive. As evidence, critics highlighted that, by 1999, only four countries had received any debt relief under HIPC. Second, the six-year program was too long and too inflexible to meet the individual needs of debtor nations. Third, the IMF and the World Bank did not cancel any debt until the completion point, leaving countries under the burden of their debt payments while they struggled to institute structural reforms. Fourth, the ESAF conditions often undermined poverty-reduction efforts. For example, privatization of utilities tended to raise the cost of services beyond the citizens' ability to pay. Finally, critics attacked HIPC as a program designed by creditors to protect creditor interests, leaving countries with unsustainable debt burdens even upon reaching the decision point.

Inadequate debt relief for such countries means that they will need to spend more on servicing debts, rather than on actively investing in programs that can reduce poverty.