IMF Working Papers

Debt Sustainability in Low-Income Countries: Policies, Institutions, or Shocks?

By Yasemin Bal Gunduz

May 9, 2017

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Yasemin Bal Gunduz. Debt Sustainability in Low-Income Countries: Policies, Institutions, or Shocks?, (USA: International Monetary Fund, 2017) accessed November 9, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

This paper estimates the determinants of external debt distress in low-income countries (LICs), disentangling the roles of institutions, shocks, and policies. The most prominent factors in raising the risk of debt distress are the weak protection of private property rights, adverse shocks to real non-oil commodity prices, and a high debt burden. Results also suggest that weak economic institutions tend to raise the probability of debt distress through persistently weak economic policies and high vulnerability to external shocks. The model enables a more granular analysis of debt sustainability in LICs and has a higher predictive power compared to the earlier scant literature.

Subject: Debt burden, Debt default, Debt sustainability, External debt, Public and publicly-guaranteed external debt

Keywords: Analysis of debt sustainability, Build-up debt, Current account, Debt accumulation, Debt burden, Debt burden indicator, Debt default, Debt distress, Debt distress episode, Debt indicator, Debt sustainability, Debt threshold, External debt sustainability, Global, Long-term debt, Low-income countries, Private property, Public and publicly-guaranteed external debt, Sample average, Short-term debt, Terms of trade, WP

Publication Details

  • Pages:

    47

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2017/114

  • Stock No:

    WPIEA2017114

  • ISBN:

    9781475599732

  • ISSN:

    1018-5941

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