African Economic Conference 2009
Fostering Development in an Era of Financial and Economic Crises
11 – 13 November 2009 • United Nations Conference Centre • Addis Ababa, Ethiopia
African Development Bank Group
Economic Commission for Africa
Debt sustainability and the ongoing financial crisis:
The case of IDA-only African countries
Leonardo Hernández
Boris Gamarra
1
DEBT SUSTAINABILITY AND THE ONGOING FINANCIAL
CRISIS:
THE CASE OF IDA-ONLY AFRICAN COUNTRIES
Leonardo Hernández1 (PRMED, World Bank)
Boris Gamarra1 (CFP, World Bank)
(First Draft, September 29, 2009)
Abstract
The ongoing financial crisis has raised concerns in many circles about a potential future wave of
sovereign defaults spreading among developing countries and, therefore, the need for additional
rounds of debt relief in poor indebted countries. This paper addresses this issue for a group of 31
IDA-only African countries, which are in a fragile debt situation. Using the most recent debt
sustainability analyses undertaken for these countries by the World Bank and the IMF, this paper
studies the potential adverse effect of the ongoing financial crisis on the countries’ debt burden
indicators, as a function of the depth and length of the crisis. The latter is measured by the fall and
the duration of such fall in exports revenues, and by the terms at which each country can obtain
financing to muddle through the crisis period. The analysis underscores the importance of
concessional financing for these countries, especially if the crisis proves to be a protracted one.
1
The views expressed in this paper are those of the authors and do not represent those of the World Bank
or its Board of Directors. We are extremely grateful to Paulina Granados for her excellent and efficient
assistance, without which this project could have not been possible.
2
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Table of Contents
1.
Introduction ..............................................................