Analyzing the poverty impact of the enhanced Heavily Indebted Poor Countries (HIPC) initiative in Bolivia

Bolivia’s external indebtedness problem rose in the seventies with the strong expansion of its external credits all the while benefiting from the increase of petroleum and tin prices. However it did not use the contracted credits efficiently as these credits were mostly allocated to unproductive projects. In the eighties, the favourable economic situation of the seventies reversed and the country faced an economic and social crisis, as well as a debt crisis as it found itself unable to pay back its scheduled debt service. The debt crisis of the eighties strongly affected Bolivia and the attempts of the international financial community to cope with the indebtedness problem through various initiatives, a buy-back arrangement1 (for private creditors), a debt reprogramming under the Paris’ Club2 framework (for bilateral creditors) and a Structural Adjustment Program3 (for the multilateral organisms), were insufficient to reach a long-lasting solution to the external indebtedness problem. In an effort to permanently get out of the process of repeated debt rescheduling and to reach debt sustainability, the Heavily Indebted Poor Countries (HIPC) debt relief programs have been implemented in Bolivia since the middle of the nineties. These programs were the first to include a multilateral debt relief and aim at combating the high level of poverty in the poorest and most indebted countries.