Overview

Much of the debt burden in low-income countries dates back to the 1970s and 80s. Many poor countries had borrowed to fund domestic projects on the back of the commodity price boom, believing that high prices and export earning would be sustained. Oil price shocks during that time, which caused recessions throughout the world, combined with high interest rates and low commodity prices to hit borrowing countries especially hard.   Though many countries recovered, many did not.   Although several rounds of debt restructuring took place to alleviate the debt burdens these countries faced, it soon became evident that a multilateral debt reduction effort such as the Heavily Indebted Poor Countries (HIPC)  Initiative would be needed to properly address the severe debt burdens of these countries.

The new Debt Department builds on the HIPC Initiative’s work. It serves several purposes including the implementation of the proposed new debt sustainability framework for low-income countries and the continued implementation of the HIPC Initiative.  The department is also responsible for shaping the World Bank’s position—when possible, in coordination with the debt policy community in general—on global debt issues facing developing countries. More on Debt Sustainability in Low-Income Countries