This paper provides an analysis of public spending choices in an economy beneÖtting from debt relief. It proposes a theoretical framework and nests it within a dynamic Computable General Equilibrium (CGE) model, which is then applied to Madagascar. Results suggest that expenditure allocations with more weight on investment in public infrastructure yield the greatest improvements in key macroeconomic variables and household welfare. This is to be contrasted with the Enhanced HIPC debt relief formula which leans more heavily towards social spending. The simulation results are robust to a number of factors identiÖed in the theoretical framework, but rely on the existence of a ísu¢ ciently highídegree of externalities to public infrastructure.