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Debt Relief and Fiscal Sustainability

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  • Sebastian Edwards

Abstract

In this paper I analyze the relationship between fiscal policy, aggregate public sector debt sustainability, and debt relief. I develop a methodology to compute the fiscal policy path that is compatible with aggregate debt sustainability in the post-HIPC era. The model explicitly considers the role of domestic debt, and quantifies the extent to which future debt sustainability depends on the availability of concessional loans at subsidized interest rates. The working of the model is illustrated for the case of Nicaragua, a country that in 2002 had one of the highest net present value of public external debt to GDP ratios.

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  • Sebastian Edwards, 2002. "Debt Relief and Fiscal Sustainability," NBER Working Papers 8939, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:8939
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    1. Gian Maria Milesi Ferretti & Assaf Razin, 2000. "Current Account Reversals and Currency Crises: Empirical Regularities," NBER Chapters, in: Currency Crises, pages 285-323, National Bureau of Economic Research, Inc.
    2. Gian Maria Milesi-Ferretti & Assaf Razin, 1996. "Sustainability of Persistent Current Account Deficits," NBER Working Papers 5467, National Bureau of Economic Research, Inc.
    3. Milesi-Ferretti, G-M & Razin, A, 1996. "Current-Account Sustainability," Princeton Studies in International Economics 81, International Economics Section, Departement of Economics Princeton University,.
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    JEL classification:

    • F3 - International Economics - - International Finance
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems

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