Current HIPC debt-sustainability thresholds are unrealistically high. The introduction of a fiscal dimension into the HIPC framework has been a step in the right direction. The fiscal threshold should be specified not in relation to debt stock, but with reference to the proportion of government revenue allocated to debt-servicing. An upper threshold in this area would be no more than 10-15 per cent. Strengthening the linkage between debt relief and poverty reduction.
Debt relief has the potential to release budget resources.
It does not provide a guarantee that the resources will be used to improve human welfare. New approaches are needed to address this task. Efforts to increase the benefits gained through debt relief have so far concentrated on debt-swap arrangements. These aim at converting debt-servicing into spending in other areas. Essentially, the arrangement involves donors, non-government organisations, or international agencies purchasing a country's debt at a discounted price.