Rethinking debt sustainability in the context of the Millennium Development Goals

The Secretary General's Report to the UN's 2005 World Summit called for a policy ofdebt sustainability that would support the development goals contained in the UN's 2000 Millennium Declaration. Debt sustainability analysis currently practiced by the multilateral financial institutions focuses on the ability of the debtor to transfer domestic resources to the creditor in the short term, without reference to the impact on overall activity, thus reducing the overall level of resources available to meetdevelopment goals. This paper builds on post-war approaches to suggest a more suitable alternative approach that places the implementation of the millenniumdevelopment goals at the centre of debt sustainability by taking a longer run approach based on developing domestic capacity to create resources to meet debtservice.