Over the last 25 years, the international community has pursued a series of measures to address unsustainable debt burdens in low-income countries. Early actions focused on debt relief for official bilateral claims—initially by rescheduling—followed by increasing levels of debt stock reduction. During this period, the Paris Club repeatedly reduced or rescheduled the debts of a number of countries.
For the first time, loans from international financial institutions were included in broader debt stock reduction agreements, which provided faster and more substantial debt relief for poor countries.
Even as past debt was relieved, however, the sustainability of low-income countries' debt was eroded by new, even greater official lending—primarily by IFIs. Between 1989 and 2003, new nominal lending to HIPCs was twice as large as the amount of nominal debt relief provided. In the early 2000s, several donor governments, think tanks, and civil society organizations began to realize that the HIPC Initiative did not provide a lasting solution to the problem of unsustainable debt in poor countries.
This essay provides a brief contextual overview of several recent debt agreements as well as the remaining challenges ahead, such as the potential reaccumulation of unsustainable debt and vulture fund activity. With additional focus and policy action, the broader stakeholder community may be able to permanently cross off debt as a development challenge.