As an alleviating measure following the debt crisis, debt relief began to be used in Africa as early as the 1970s, when debt was written off sporadically as part of humanitarian assistance. The outbreak of debt crisis in Latin America brought systematic debt relief to the international stage and gained high attention from the international community.
Theoretically, debt relief can improve the overall balance of payments of debtor countries by reducing their external debt stock, alleviate the pressure of external debt and that on fiscal expenditure to a certain extent. It therefore helps create an enabling external environment for debtor countries to adopt a more proactive fiscal policy in an effort to expand domestic demand for better development of their economies.
Offering a leverage for international financial institutions to interfere in the internal politics and economy of debtor countries In 2020, the IMF and the World Bank continued with their customary conditional approach, requiring debtor countries to disclose all public debt information and placing the fiscal expenditure of debtor countries after debt reduction under oversight. They also made participation in the Common Framework a precondition for receiving matching funds. This will undoubtedly squeeze the policy space of those African countries who are in urgent need of addressing debt and financial difficulties.
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