Decomposing Changes in Debt Service Ratios in Developing Economies, 2001–2021

Harvey Baldovino, Graham Bird, Debra Claypool and Tianan Ding

Review of Development Economics, 2026, vol. 30, issue 3, 2032-2053

Abstract: Poor countries have been buffeted by the global financial crisis in 2008/2009 and the COVID‐19 pandemic. A deteriorating debt situation can undermine debt sustainability and reduce the chances of achieving the UN's Sustainable Development Goals. This paper analyzes the empirical evidence relating to indebtedness across upper‐middle, lower‐middle and low‐income economies. It focuses on the ratio between debt service and exports, and examines the extent to which changes in this DSR have been associated with changes in its key components: indebtedness and amortization, interest rates, and export performance, as well as by other factors. The paper starts by adopting an accounting approach but then builds on this using a feasible generalized least squares regression model to test more broadly for the causes of changes in the DSR. Although we find that debt accumulation has played an important role, we also find that amortization and interest rates, that affect servicing costs, and export performance have been important. Our regression analysis reveals that the relative importance of debt service rather than simply the stock of debt has been particularly important for low‐income countries towards the end of our study period. We discover that the impact of the pandemic was greater than that of the GFC. We also analyze the relationship between DSRs and debt sustainability, and plot out indicative scenarios for the future and the implications for debt. Finally, we use our empirical findings to critically discuss existing debt policy and suggest the broad direction for future policy.

Date: 2026
References: Add references at CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1111/rode.70083

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:rdevec:v:30:y:2026:i:3:p:2032-2053

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=1363-6669

Access Statistics for this article

Review of Development Economics is currently edited by E. Kwan Choi

More articles in Review of Development Economics from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().