External Debt Sustainability Analysis for the Medium Term: A Case Study

Sabina Khurram Jafri ()
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Sabina Khurram Jafri: State Bank of Pakistan, Postal: I.I. Chundrigar Road, , Karachi-74000, Pakistan,, http://www.sbp.org.pk

Economia Internazionale / International Economics, 2009, vol. 62, issue 3, 363-382

Abstract: This paper estimates Pakistan’s’ external debt by using Debt Sustainability Assessment (DSA) methodology developed by IMF and World Bank [IDA and IMF (2004, 2007), IMF (2005) and World Bank (2005)]. The main findings of the paper are that in response to small individual shocks to main components of external debt evolution i.e., real GDP growth, non-interest current account balance to GDP ratio and the ratio of net non-debt creating capital inflows to GDP, country’s external debt to GDP ratio will although increase, but would remain within safe limits. Secondly a very large depreciation of the exchange rate has the potential of causing the debt to GDP ratio to breach the debt threshold level indentified for Pakistan. Finally, a large combined shock to real GDP growth, non-interest current account balance to GDP ratio and the ratio of net non-debt creating capital inflows to GDP can also result in a need of another debt rescheduling for the country.

Keywords: External Debt; Sustainability; Pakistan (search for similar items in EconPapers)
JEL-codes: C02 F34 H63 (search for similar items in EconPapers)
Date: 2009
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