quality of growth, contrasting stylized facts underpinning the growth process across the two regions. Our results may have implications for the extent to which African countries can enter the virtuous cycle of longrun growth enjoyed by Asian emerging market economies.

In effect, contrasting the growth and welfare performance of Asia’s emerging market economies, the baseline projection of the model for Ethiopia suggests that under the current post-HIPC growth rates, average per capita real income will not double, even decades after the MDG target date of 2015. Worse still, a renewed deterioration of external debt thresholds in the post-HIPC era has emerged as a key constraint to the expanding fiscal space that released the critical resources needed for increased capital expenditure in support of growth and economic development.

The remainder of the paper is organized as follows. The next section analyzes the dynamics of growth in the post-HIPC era across Sub-Saharan Africa. In particular, it contrasts the growth performance between HIPCCompletion Point countries and non-HIPCs. It also contrasts Asian emerging market economies with SubSaharan African countries. Section III proposes a macroeconomic framework for assessing the HIPC dividends measured in terms of economic growth. In Section IV, the proposed model is applied to Ethiopia to quantify the HIPC dividends (and risks associated with resurgence of another debt cycle), and particularly estimates long-run growth and average income under certain assumptions. The last section concludes.

# **II Dynamics of Growth of African Economies in the Post-HIPC Era**

Though highly volatile, Sub-Saharan Africa’s growth spells can be divided into three main episodes: the pre1974 oil crisis, the adjustment era which started in the mid-1970s and ran through the 1990s, and the postHIPC era after the 1990s. The first episode running through the 1974 oil shock can also be labeled as the immediate post-independence era. Existing empirical records on that episode point to a rather strong economic performance, as average growth rates enjoyed by African countries exceeded 3% over the period (Maddison, 1995; Artadi and Sala-i-Martin, 2003).

According to Maddison (1995), the Africa region witnessed a rapid increase in income and enjoyed a relatively large contribution to global trade during that first episode. However, the relatively good performance of the region largely reflected the dichotomous trade pattern of the globalization landscape inherited from the colonial era, and still, the relatively large contribution of primary commodity and natural resources to growth under that globalization landscape. While former colonies and developing countries specialized in exports of natural resources, advanced economies dominated the production and exports of manufactured goods.

Exponential growth in manufacturing exports, however, over the past decades significantly altered these historical trade patterns (World Bank, 2002; Fofack, 2009).<sup>7</sup> Under those rapidly changing trading patterns, sudden growth reversals and rising internal (savings-investment) and external (balance of payments) deficits dominated the second growth episode. A lot has been written on Africa’s dismal growth performance during that episode (Easterly and Levine, 1997; Artadi and Sala-i-Martin, 2003).<sup>8</sup> Artadi and Sala-i-Martin (2003)

> 7 Hence, under that old dichotomous globalization landscape, Africa essentially enjoyed the benefits of its excess natural resource endowment over other regions.

> 8 Easterly and Levine (1997) have labeled the second episode as ―Africa Growth Tragedy.‖ However, they have largely attributed the growth tragedy and poor economic outcomes to the politics of ethnic divisions and conflicts.

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