On the sustainability of external debt: is debt relief enough?

Gianni Vaggi and Annalisa Prizzon

Cambridge Journal of Economics, 2014, vol. 38, issue 5, 1155-1169

Abstract: Elaborating on Pasinetti (1998), the ‘geometry of debt sustainability’ (GDS) represents an analytical tool for the analysis of the long term sustainability of foreign debt. The paper focuses on debt sustainability in low-income countries, which face several major challenges simultaneously: achieving economic growth, consolidating human development goals and meeting regular debt service payments. The GDS reveals how the ‘structural’ aspect of debt sustainability—as indicated by trends in the non-interest current account—is closely interlinked with sustainability from a ‘financial’ point of view—as indicated by the relationship between the growth and the interest rate. The GDS shows why both debt cancellation and additional aid are necessary to give indebted low-income economies a chance to improve their long term economic viability.

Date: 2014
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Working Paper: On The Sustainability of External Debt: Is Debt Relief Enough? (2009)
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