Abstract
This study explores that whether the debt financing or debt forgiving would be
suitable for the Highly Indebted Poor Countries (HIPCs). Debt Laffer curve
theory has been tested in 21 HIPCs by applying price equation of debt,
maximized value of debt and price elasticity approach over the period of 1980
to 2014. The maximized value of debt criterion implies that Chad is not eligible
for the debt write-off strategy in comparison with the rest of the countries. By
applying price elasticity approach, it is observed that only Burkina Faso,
Cameroon, Chad, and Republic of Congo are eligible for debt financing while
the remaining countries should adopt debt write-off facility. The crux of the
study is that overall debt forgiveness is suitable for the HIPCs. Moreover, it is
also in the favor of both the creditor countries and various international financial
institutions such as World Bank and IMF and HIPCs itself. The study suggests
that the creditors should continue to be financing along with improving
structural policies and institutions of the HIPCs.
Muhammad Ramzan Sheikh, Imran Sharif Chaudhry, Hamza Jan, Saima Khan Khosa. (2020) DEBT LAFFER CURVE ANALYSIS: A CASE STUDY OF HEAVILY INDEBTED POOR COUNTRIES, International Journal of Management Research and Emerging Sciences, Volume 10, Issue 1.
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