The Debt Sustainability Framework for Low-Income Countries

Barkbu, Bergljot; Manchec, Marie-Helene Le; Beddies, Christian

doi:10.5089/9781589067929.084

Cited by 7 publications

(8 citation statements)

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“…33 Thirty percent may raise some eyebrows, but it is not as big as some of the numbers thrown around in the literature and in policy work. See for instance the scaling-up exercise in Box 4.1 in Barkbu et al (2008) and Gupta, Powell, and Yang (2006). 34 See IMF (2009a) and IMF staff calculations.…”

Section: Calibration Of the Modelmentioning

confidence: 99%

“…A call to borrow for development neeeds is endorsed by UNCTAD (2004) and EURODAD (2001EURODAD ( , 2009, in the context of the human development approach to debt sustainability. 4 See IMF and World Bank (2006) and Barkbu et al (2008), among others. 5 The thresholds depend on the quality of policies and institutes as measured by the Country Policy and Institutional Assessment (CPIA) index of the World Bank.…”

Section: Introductionmentioning

confidence: 99%

“…On calls to pursue alternative scenarios in DSAs, seeIMF and World Bank (2006) andBarkbu et al (2008).…”

mentioning

confidence: 99%

“…Note that this is equivalent to say that taxes and transfers are determined by the reactions functions (27)-(30), where  =  and the gap Gap  is defined in (23); while the path of domestic debt is determined by equation(24), which is a different way to express the government budget constraint.48 Interest payments on the internal debt are usually several times larger than interest payments on the external debt, exceeding 5% in some countries Barkbu et al (2008). also note that empirical studies find that rising domestic debt significantly increases the likelihood of external debt distress.…”

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confidence: 99%

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Public Investment, Growth, and Debt Sustainability: Putting together the Pieces

Berg

Portillo²,

Buffie³

et al. 2012

IMF Working Papers

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This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy, or of DFID. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. We develop a model to study the macroeconomic effects of public investment surges in low-income countries, making explicit: (i) the investment-growth linkages; (ii) public external and domestic debt accumulation; (iii) the fiscal policy reactions necessary to ensure debt-sustainability; and (iv) the macroeconomic adjustment required to ensure internal and external balance. Well-executed high-yielding public investment programs can substantially raise output and consumption and be self-financing in the long run. However, even if the long run looks good, transition problems can be formidable when concessional financing does not cover the full cost of the investment program. Covering the resulting gap with tax increases or spending cuts requires sharp macroeconomic adjustments, crowding out private investment and consumption and delaying the growth benefits of public investment. Covering the gap with domestic borrowing market is not helpful either: higher domestic rates increase the financing challenge and private investment and consumption are still crowded out. Supplementing with external commercial borrowing, on the other hand, can smooth these difficult adjustments, reconciling the scaling up with feasibility constraints on increases in tax rates. But the strategy may be also risky. With poor execution, sluggish fiscal policy reactions, or persistent negative exogenous shocks, this strategy can easily lead to unsustainable public debt dynamics. Front-loaded investment programs and weak structural conditions (such as low returns to public capital and poor execution of investments) make the fiscal adjustment more challenging and the risks greater.

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Section: Calibration Of the Modelmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

“…On calls to pursue alternative scenarios in DSAs, seeIMF and World Bank (2006) andBarkbu et al (2008).…”

mentioning

confidence: 99%

mentioning

confidence: 99%

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Public Investment, Growth, and Debt Sustainability: Putting together the Pieces

Berg

Portillo²,

Buffie³

et al. 2012

IMF Working Papers

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“…On the one hand, this framework should direct borrowing decisions of low‐income countries in a way that meets their financing needs with their current and future repayment ability. On the other hand, it should give guidance for creditors' lending and grant‐allocation decisions to ascertain that financial resources are offered on terms that do not endanger debt sustainability in low‐income countries (IMF and IDA, 2004a, b; Barkbu et al , 2008, pp. 8–10; Beddies et al , 2008, p. 5).…”

Section: Debt Restructuringmentioning

confidence: 99%

Sovereign Insolvency Procedures – A Comparative Look at Selected Proposals

Berensmann

Herzberg

2009

Journal of Economic Surveys

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Abstract. The most practicable short-term approaches for sovereign debt restructuring would include a code of conduct (voluntary approach) and collective action clauses (contractual approach). In the medium term, a sovereign insolvency procedure (statutory approach) may have an important role to play because it would be a comprehensive instrument designed to coordinate different creditor groups prior to and during a debt crisis. This paper provides a survey of six comprehensive policy proposals for a sovereign bankruptcy procedure. It points to approaches that could improve existing proposals and creates a basis for new proposals which could prove conducive to reaching political consensus.

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Essays on fiscal policy: empirical evidence from SSA countries

Woldu

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Fiscal policy tools have piqued the interest of many governments and academics worldwide due to their ability to respond to aggregate demand shocks. Therefore, the thesis aims to identify the determinant factors of fiscal multipliers; examine the threshold level of the public debt that makes the fiscal policy sustainable, and identify the conditions under which countries undertake fiscal consolidation measures and the effects of fiscal consolidation on economic activity. In addition, this thesis deals with the connection between fiscal policy shocks, long-run fiscal sustainability, and contractionary fiscal policy, which most existing studies have largely failed to consider.Chapter two presents the definitions and concepts of expansionary and contractionary fiscal policy.In addition, this section reviews the terminologies, concepts, and debates surrounding the macroeconomic effects of fiscal policy on economic activity. Finally, chapter three discusses the overview of the trends in fiscal policy and economic performance of SSA countries from 2000-2019. It also highlights the effect of the COVID-19 pandemic on the economic performance and fiscal conditions of SSA countries.The thesis comprises three empirical chapters that are not mutually exclusive, yielding several novel and exciting results. The three chapters employ econometric panel techniques using annual data from 40 countries in SSA spanning from 2000 to 2019. The first study estimates the asymmetric effects of fiscal policy on output; the second assesses the tipping point of public debt to GD ratio that makes fiscal policy sustainable; and the third examines whether contractionary austerity works for SSA countries.Chapter four explores the output response to discretionary fiscal policy is a crucial aspect of examining various theories and findings of empirical studies and delivering guidance to policymakers. This study analyzes the output response to unanticipated fiscal spending shocks under several structural economic characteristic factors, including business cycle states, debt burden, the openness of the economy, exchange rate regimes, and institutional quality, using annual data from 40 countries in SSA spanning from 2000 to 2019 in a panel threshold vector autoregression model. The findings indicate that fiscal spending multipliers have sizable effects on output during recession periods; in economies operating under lower trade openness, a fixed exchange rate, a low debt burden, and a democratic governance regime. Based on the results, this ix xii

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The Debt Sustainability Framework for Low-Income Countries

Cited by 7 publications

References 1 publication

Public Investment, Growth, and Debt Sustainability: Putting together the Pieces

Public Investment, Growth, and Debt Sustainability: Putting together the Pieces

Sovereign Insolvency Procedures – A Comparative Look at Selected Proposals

Essays on fiscal policy: empirical evidence from SSA countries

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