Knowra Debt sustainability Debt sustainability Debt sustainability is a borrower's capacity to meet debt obligations over time without default or implausibly large policy adjustments. It depends on debt dynamics, financing conditions, and the borrower's ability to generate income or revenue.
Debt dynamics : The forces that change a borrower's debt over time, including interest, growth, borrowing, and repayments. Tracks how current fiscal and economic conditions move debt onto a sustainable or unstable path.
International Monetary Fund : An international organization that promotes monetary cooperation and provides financial assistance to member countries. Its country-program decisions often depend on whether public debt is judged sustainable.
Liquidity risk : The risk that a borrower cannot obtain cash or refinancing when payments come due. A borrower may face an immediate cash shortfall even if its long-term debt is sustainable.
Sovereign risk : The risk that a government will fail to meet its debt obligations or change their terms. Market pricing can signal perceived sustainability risks but may also amplify them.
Public debt : The outstanding financial obligations of a government and, under some measures, other public entities. Public debt is the stock whose repayment capacity the sovereign sustainability assessment evaluates.
Debt-to-GDP ratio : A measure comparing a country's public debt with the annual value of its economic output. Provides a scale-adjusted indicator of public debt, though it cannot establish sustainability alone.
World Bank : An international development institution that provides financing and expertise to lower- and middle-income countries. It assesses debt risks in developing countries and supports frameworks for responsible borrowing.
Insolvency : A condition in which a debtor cannot meet obligations from available resources or assets. Sustainability concerns a forward-looking capacity; insolvency describes inability to pay under current conditions.
Debt ceiling : A legal limit on the amount of debt a government may issue. A statutory borrowing cap can trigger payment risk independently of long-term repayment capacity.
Government budget constraint : The accounting relationship linking government spending, revenue, borrowing, and debt over time. It grounds the arithmetic connecting fiscal choices to future public debt.
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