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What Is Debt Sustainability? (Hakura)

What Is Debt Sustainability? Many factors go into assessing how much debt an economy can safely carry Dalia Hakura published by Finance & Development/IMF (9/2020)

COUNTRIES INCUR DEBT by borrowing. Borrowing can enable countries to finance important development programs and projects—but, taken too far, the burden of debt repayment can overwhelm a country’s finances, at worst leading to default. Elevated debt in low-income countries and emerging market economies in recent years has raised concerns about countries’ capacity to sustain these levels of debt. COVID-19 is adding to spending needs as countries seek to mitigate the health and economic effects of the crisis. The resulting rise in public debt will likely heighten the tension between meeting important development goals and containing debt vulnerabilities.

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