Publication:
Making the Market Access Countries’ Debt Sustainability Framework Relevant for Emerging Markets

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dc.contributor.authorGill, Indermit
dc.contributor.authorPinto., Brian
dc.date.accessioned2024-07-01T20:21:15Z
dc.date.available2024-07-01T20:21:15Z
dc.date.issued2024-07-01
dc.description.abstractThe debt sustainability framework for market access countries has been designed by the International Monetary Fund for all market access countries, a set that includes emerging markets and advanced economies. The debt sustainability framework for market access countries was reviewed in 2021 and renamed the “sovereign risk and debt sustainability framework for market access countries.” A new public debt sustainability analysis template was rolled out in 2022 and became operational in 2023. This paper examines the framework from the perspective of emerging markets, which borrow from and have a policy dialogue with the World Bank. While the debt sustainability analysis template is based on government borrowing in both the home, or local, currency and foreign currency, advanced economies predominantly borrow only in the local currency. Emerging market governments are more likely to borrow in both currencies, are more vulnerable to crises, and have less fiscal and monetary policy space than their advanced economy counterparts. Therefore, a single framework for both advanced economies and emerging markets is unduly restrictive. The paper suggests changes to fit the emerging market debt context better, motivating the recommendations by a contrast between Japan and Sri Lanka. The recommended changes would require a composite real interest rate to be calculated for emerging markets as in the single-currency environment typical of advanced economies. This would facilitate an assessment of debt dynamics based on the debt-to-GDP ratio, primary deficits, and (r-g), or the difference between the real interest and the real growth rate. Further, the composite real interest rate could usefully be broken down into its local and foreign currency components to provide insight into debt dynamics and guide borrowing decisions. These modifications would facilitate a more transparent assessment of near-term risks and medium-term projections, for which the paper suggests that the set of comparator countries exclude advanced economies.en
dc.identifierhttp://documents.worldbank.org/curated/en/099157306282421319/IDU11cda64b011b3f1490e1a6301bbc5eb6ba657
dc.identifier.doi10.1596/41807
dc.identifier.urihttps://hdl.handle.net/10986/41807
dc.languageEnglish
dc.language.isoen_US
dc.publisherWashington, DC: World Bank
dc.relation.ispartofseriesPolicy Research Working Paper; 10831
dc.rightsCC BY 3.0 IGO
dc.rights.holderWorld Bank
dc.rights.urihttps://creativecommons.org/licenses/by/3.0/igo/
dc.subjectDEBT AND MACROECONOMIC STABILITY
dc.subjectMARKET ACCESS ISSUES
dc.subjectGROWTH FROM EMERGING MARKETS
dc.subjectDECENT WORK AND ECONOMIC GROWTH
dc.subjectSDG 8
dc.subjectJAPAN
dc.subjectSRI LANKA
dc.titleMaking the Market Access Countries’ Debt Sustainability Framework Relevant for Emerging Marketsen
dc.typeWorking Paper
dspace.entity.typePublication
okr.date.disclosure2024-07-01
okr.date.lastmodified2024-06-28T00:00:00Zen
okr.doctypePolicy Research Working Paper
okr.doctypePublications & Research
okr.docurlhttp://documents.worldbank.org/curated/en/099157306282421319/IDU11cda64b011b3f1490e1a6301bbc5eb6ba657
okr.guid099157306282421319
okr.identifier.docmidIDU-1cda64b0-1b3f-490e-a630-bbc5eb6ba657
okr.identifier.doi10.1596/1813-9450-10831
okr.identifier.externaldocumentum34353609
okr.identifier.internaldocumentum34353609
okr.identifier.reportWPS10831
okr.import.id4651
okr.importedtrueen
okr.language.supporteden
okr.pdfurlhttp://documents.worldbank.org/curated/en/099157306282421319/pdf/IDU11cda64b011b3f1490e1a6301bbc5eb6ba657.pdfen
okr.region.geographicalWorld
okr.topicInternational Economics and Trade::Access to Markets
okr.topicInternational Economics and Trade::International Trade and Trade Rules
okr.topicMacroeconomics and Economic Growth::Markets and Market Access
okr.topicFinance and Financial Sector Development::Debt Markets
okr.unitOff of Sr VP Dev Econ/Chief Econ (DECVP)
relation.isSeriesOfPublication26e071dc-b0bf-409c-b982-df2970295c87
relation.isSeriesOfPublication.latestForDiscovery26e071dc-b0bf-409c-b982-df2970295c87
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