Economics Research Institute Study Paper
Utah State University Department of Economics
Subsaharan African states clearly labor under an extraordinary weight of external debt. A strong groundswell of opinion has fonned behind debt forgiveness efforts. The plight of Africa's poor demands serious response from creditors and donors, not bo mention their own governments. yet the common economic arguments for debt relief find little empirical support in SSA. In particular, there is no evidence of debt overhang serving as a tax on investment or GDP growth. The real problem of external debt in SSA is the heavy marginal tax it levies on current account receipts. Surely this contributes to persistent balance-of-payments crises. The most important dimension of debt relief for SSA states is, thus, less stock reduction than release from the foreign exchange demands of repayment.
Barrett, Christopher B., "The Economic and Ethical Ambiguities of African Debt Forgiveness" (1996). Economic Research Institute Study Papers. Paper 84.