Debt Sustainability: Relief Target, Rule for Lending or Policy Goal for Low-Income Countries?

Martin, Matthew

Since the 1970s, there has been a growing economic literature analyzing how to decide whether a country’s debt is "sustainable". Since 1996, "debt sustainability" has become much more important, as debt relief initiatives for some low-income countries – especially those covered by the Initiative for Heavily Indebted Poor Countries (HIPCs) – have for the first time been based partly on the aim of making countries’ debt "sustainable", rather than on the lowest common denominator of what creditors are willing to provide. These initiatives have set threshold levels at which they consider debt to be "sustainable", and then encouraged creditors to reduce debt by amounts that allow countries to reach the thresholds, or go well below them.


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Initiative for Policy Dialogue
Initiative for Policy Dialogue
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February 2, 2010


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