Measuring debt sustainability

Debt sustainability and debt relief

Debt sustainability is also affected by vulnerability to external shocks.

A long term alternative requires some capacity to write down debt where it has reached excessive levels.

Either way, debt ratios will rise, and the competitiveness gap with Germany will widen.

The debt servicing capacity of the DDLICs differs widely as well.

This strategy s success presupposes that, in the interim, economic growth will strengthen the capacity to repay debt down the line.

Without growth, tax revenues will remain stagnant, and the capacity to service debts will continue to erode.

Finally, despite the highly technical character of DSA, it does not address many issues.

To move forward, the Secretary General proposed that debt sustainability should be redefined as the level of debt that allowed a country to achieve the Millennium Development Goals and reach 2015 without an increase in its debt ratios.

7. Stresses that debt sustainability depends upon a confluence of many factors at the international and national levels, underscores that no single indicator should be used to make definitive judgements about debt sustainability, and emphasizes that country circumstances should be taken into account

In this regard, the task force deems it necessary to define debt sustainability within a State context with a view to attaining a level of debt that allows countries to achieve the Goals and avoid an increase in debt ratios by 2015.

However, much more needed to be done to assist countries that had reached the completion point but continued to experience severe debt sustainability and debt servicing problems.

Moreover, when countries had no capacity to service their external debt, debt cancellation did not generate more resources for development, although it did improve debt indicators.

This prevents timely debt workouts when needed, effectively impeding recovery.

Emphasizes that creditors and debtors must share responsibility for preventing unsustainable debt situations

Many speakers stated that debt sustainability analysis was an important element in improving debt management.

4. Emphasizes that creditors and debtors must share responsibility for preventing unsustainable debt situations

Second, Germany s experience with this kind of agency shows that it is impossible to sell off large parts of an economy simultaneously.

Emphasizes that creditors and debtors must share responsibility for preventing unsustainable debt situations

We need to deepen our thinking on debt sustainability and on taking into account the outside shocks that are too frequent in Africa.

Excessive centralization and harmonization are decimating the subsidiarity and competition needed to drive Europe s economies, as the socialization of debt undermines weaker economies accountability.

While some of our countries have benefited from debt relief strategies including the Highly Indebted Poor Countries Initiative that has not as yet resulted in debt sustainability in the region.

3. Also emphasizes that creditors and debtors must share responsibility for preventing unsustainable debt situations

That way, the economy as a whole would not come under pressure to deleverage and thus push production below potential output.

Otherwise, a liquidity run would create solvency problems for all the big eurozone debtors.

Invite the Bretton Woods institutions to consider the issue of debt sustainability and the implications of an HIPC initiative for Haiti.

Some argued that the aim of debt sustainability was to re establish creditworthiness and access to return to borrowing in private financial markets.

Debt sustainability should be redefined as the level of debt consistent with achieving the Millennium Development Goals without creating new debt obligations.

B. External debt and debt relief

Emphasizing the important role that private sector creditors play in debt relief and debt sustainability,

The ability to refinance government debt and keep costs down is essential to strengthening public finances and boosting GDP growth.

Recession and price deflation reduce tax receipts and worsen the dynamics of public debt, threatening the return to sustainability.

But when a government does that, output and incomes decline, unemployment increases, and the ability to repay may actually decrease.

Such initiatives should include efforts by IMF and the World Bank to develop a debt sustainability framework for low income countries.

The resolution, moreover, calls for the treatment of multilateral debt to alleviate debt and debt service burdens.

For many heavily indebted non HIPC and middle income countries, debt sustainability will require significantly more debt reduction or restructuring than has yet been proposed.

To move forward, we should redefine debt sustainability as the level of debt that allows a country to achieve the Millennium Development Goals and reach 2015 without an increase in debt ratios.

B. External debt and debt relief . 27 32 10

Debt

Converting some portion of debt to equity under predetermined solvency threatening conditions would provide an extra layer of protection.

Invites the Bretton Woods institutions to consider the issue of debt sustainability and the implications of the Highly Indebted Poor Countries (HIPC) initiative for Haiti

A long term alternative requires some capacity to write down debt where it has reached excessive levels. But it is also necessary to establish an iron clad guarantee of some part of the outstanding debt, in order to remove fear of a complete write down.

Limited capacity for debt socialization reflects the EU Treaty s no bailout clause, which bars outright mutualization at the eurozone level of (national) public debt.

Other peripheral countries already have Greek style problems of debt sustainability and eroded competitiveness.