Debt Relief and Civil War
UNU WIDER Discussion Paper, 2001/57
Posted: 20 Nov 2014
Date Written: 2001
Of the 41 HIPCs, 11 are classified by the IMF and World Bank as conflict-affected. Can debt relief reduce the level of violent conflict in these countries? By providing additional resources to finance broad-based public spending, debt relief could help to redress the grievances that contribute to conflict. It could also reduce the ability of those motivated by greed to recruit followers, since the incomes, and therefore the grievances of followers, will fall if they benefit from broad-based public spending. But four things can go wrong with the use of debt relief in this way. First, the war party may prevail over the peace party in government, especially if the war party profits directly from conflict. Second, the fiscal system may be so institutionally weak that it cannot achieve the promised fiscal transfer even if the peace party prevails.
Keywords: debt relief, conflict, fiscal policy, sub-Saharan Africa
JEL Classification: C72, F34, F35, O10, O55
Suggested Citation: Suggested Citation