Debt Sustainability for Low-Income Countries: A Review of Standard and Alternative Concepts

Danny Cassimon, Blanca Moreno-Dodson and Quentin Wodon

MPRA Paper from University Library of Munich, Germany

Abstract: Governments in low-income countries have the difficult task of making wide-ranging decisions about public spending, taxation, and borrowing. Although we can analyze at length how both public spending and taxation can be designed and implemented to contribute to growth and poverty reduction, the biggest challenge that most developing countries face is in determining how much they can borrow without jeopardizing their long-term prospects. The objective of this paper is to introduce the key issues involved in debt sustainability analysis. We review the main approaches developed in the literature, starting from the traditional fiscal and external approaches and covering recent alternative frameworks, such as the debt overhang analysis and the human development approach (especially as it relates to the funding requirements for achieving the Millennium Development Goals).

Keywords: Debt sustainbility; fiscal sustainability; debt overhang; Millennium Development Goals; human development (search for similar items in EconPapers)
JEL-codes: E62 F34 H63 (search for similar items in EconPapers)
Date: 2008-01
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (12)

Published in Public Finance for Poverty Reduction: Concepts and Case Studies from Africa and Latin America (edited by Blanca Moreno-Dodson and Quentin Wodon, published in World Bank Directions in Development) (2008): pp. 21-56

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:11077

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