The Impact of External Indebtednesson Poverty in Low-Income Countries

Abstract

This paper explores the relationship between external debt and poverty. A number of observers have argued that high external indebtedness is a major cause of poverty. Using the first-differenced general method of moments (GMM) estimator, the paper models the impact of external debt on poverty, measured by life expectancy, infant mortality, and gross primary enrollment rates, while duly taking into account the impact of external debt on income. The paper thus endeavors to bring together the literature that links external debt with income growth and poverty. The main conclusion is that once the effect of income on poverty has been taken into account, external indebtedness indicators have a limited but important impact on poverty.Poverty;External debt;HIPC Initiative;Economic growth;mortality rate, life expectancy, debt service, infant mortality, infant mortality rate, external indebtedness, debt overhang, birth, debt relief, debt service to exports, life expectancy at birth, net present value of debt, external debt indicators, debt crisis, stock of debt, debt service payment, debt service payments, debt burden, nominal stock of debt, debt servicing, ratio of debt, debt service to export, foreign debt, external borrowings, external resources, debt sustainability, external finance, debt stocks, debt reduction, debt stock, debt problems, mortality rates, external debts, ratio of debt service to exports, infant mortality rates, number of deaths, debt data, multilateral debt relief, relief mechanisms, international debt, traditional debt relief, debt sustainability analyses, external debt burden, debt relief mechanisms, births, lower life expectancy, live birth, international lending, multilateral debt, external debt stock, traditional debt relief mechanisms, debt service reduction, relief debate