Cancelling of poor-country debt does not mean that the best way to give aid is through grants only. Aid through loans may often prove superior, provided that it maintains debt sustainability. A new scheme for soft loans is suggested, with higher interest rates and cancellation provisions if bad...

Investment in most heavily indebted countries has been weak since 1982. The widely accepted debt overhang proposition interprets the investment drop as a moral hazard problem: a heavy debt burden raises the incentive to consume, because the marginal benefit of investment would go to the...

The Brady Initiative refers to debts owed to commercial banks. Debt and debt service reduction are to be achieved mainly by buying back bank debts with a considerable discount or by swapping old bank debts for new papers with the same value but lower interest rates. The Brady Initiative has led...

The Brady Initiative has led to the conclusion of several debt-relief agreements. Opinion on the effects of these agreements on the debtor countries involved vary widely. The following article aims at clarifying the debate.