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Debt Sustainability for Low-Income Countries: A Review of Standard and Alternative Concepts

Author

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  • Cassimon, Denis
  • Moreno-Dodson, Blanca
  • Wodon, Quentin

Abstract

Governments in low-income countries have the difficult task of making wide-ranging decisions about public spending, taxation, and borrowing. Although we can analyze at length how both public spending and taxation can be designed and implemented to contribute to growth and poverty reduction, the biggest challenge that most developing countries face is in determining how much they can borrow without jeopardizing their long-term prospects. The objective of this paper is to introduce the key issues involved in debt sustainability analysis. We review the main approaches developed in the literature, starting from the traditional fiscal and external approaches and covering recent alternative frameworks, such as the debt overhang analysis and the human development approach (especially as it relates to the funding requirements for achieving the Millennium Development Goals).

Suggested Citation

  • Cassimon, Denis & Moreno-Dodson, Blanca & Wodon, Quentin, 2008. "Debt Sustainability for Low-Income Countries: A Review of Standard and Alternative Concepts," MPRA Paper 11077, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:11077
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Danny Cassimon & Dennis Essers & Karel Verbeke, 2015. "What to do after the clean slate? Post-relief public debt sustainability and management," BeFinD Working Papers 0103, University of Namur, Department of Economics.
    2. I. Koetsier, 2017. "The fiscal impact of natural disasters," Working Papers 17-17, Utrecht School of Economics.
    3. Lau, Evan & Moll de Alba, Jaime & Liew, Kim-Hing, 2022. "Debt and economic growth in Asian developing countries," Economic Analysis and Policy, Elsevier, vol. 76(C), pages 599-612.
    4. Evan Lau & Ahmad Zubaidi Baharumshah & Soon, 2013. "The behavior of external debt in Asian countries: evidence based on panel unit root tests," Journal of Business Economics and Management, Taylor & Francis Journals, vol. 14(sup1), pages 377-394, June.
    5. I. Koetsier & J.A. Bikker, 2017. "Herding behaviour of Dutch pension funds in sovereign bond investments," Working Papers 17-15, Utrecht School of Economics.
    6. repec:nam:befdwp:3 is not listed on IDEAS
    7. Klomp, Jeroen, 2017. "Flooded with debt," Journal of International Money and Finance, Elsevier, vol. 73(PA), pages 93-103.
    8. Salem Kanoun, 2012. "Linkages Between Fiscal Debt Sustainability, Growth And Poverty: An Application To Tunisia," Book Chapters, in: João Sousa Andrade & Marta C. N. Simões & Ivan Stosic & Dejan Eric & Hasan Hanic (ed.), Managing Structural Changes - Trends and Requirements, edition 1, volume 1, chapter 12, pages 214-249, Institute of Economic Sciences.
    9. I. Koetsier & J.A. Bikker, 2017. "Herding behaviour of Dutch pension funds in sovereign bond investments," Working Papers 17-15, Utrecht School of Economics.
    10. Mr. Emanuele Baldacci & Mr. Sanjeev Gupta & Mr. Carlos Mulas-Granados, 2010. "Restoring Debt Sustainability After Crises: Implications for the Fiscal Mix," IMF Working Papers 2010/232, International Monetary Fund.

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    More about this item

    Keywords

    Debt sustainbility; fiscal sustainability; debt overhang; Millennium Development Goals; human development;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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