This paper considers the problem of allocation of investment for a debtor country that faces a ceiling on the amount of foreign debt it can accumulate. It shows that it is optimal for the debtor country to create a more open economy by favoring investment in the export sector over investment in...

This paper constructs and analyzes an optimizing model of a highly-indebted small open economy. An important innovation in the model is the incorporation of sovereign risk through the specification of an upward-sloping foreign debt supply function. The model is used to examine the interaction...

This paper explores how banking sector developments and characteristics influence the propagation of risks from the banking sector to sovereign debt, including how they affect the extent of fiscal costs of banking crises when those occur. It then proposes practices and policies for the fiscal...

This paper develops a technique to value guarantees on interest payments on developing-country debt, and provides some preliminary estimates of the cost of such guarantees. The cost of interest payment guarantees is not directly observable because a guarantee is a contingent obligation that...

Benin remains at moderate risk of external debt distress. The rating is unchanged from the previous November 2018 DSA. All the projected external debt burden indicators remain below their thresholds under the baseline, but the ratio of the present value (PV) of external debt to exports exceeds...

With some 19 million US Dollars (1.6 percent of GDP) in unresolved arrears to official bilateral creditors, Grenada remains in external public debt distress. However, debt appears sustainable reflecting favorable projected debt dynamics from substantial fiscal surpluses that are supported by the...

The joint World Bank/IMF Debt Sustainability Analysis (DSA) has been prepared in the context of the 2019 Article IV Consultation, for the first time based on the revised framework for low-income countries. Results indicate moderate risk of debt distress for both external and overall public debt....

An updated joint assessment of Rwanda's debt sustainability suggests continued low risk of external debt distress. External debt burden indicators remain below risk thresholds, except for a short and temporary breach of debt service indicators in 2023, when the Eurobond issued in 2013 matures....

Togo's risk of external debt distress continues to be moderate, while the overall risk of debt distress is high-unchanged from the previous Debt Sustainability Analysis (DSA) published in December 2018. While the mechanical results point to a low risk of external debt distress, judgment was...

The updated DSA suggests that the external risk of debt distress for Vanuatu remains moderate with limited space to absorb shocks. All external debt indicators remain below the relevant indicative thresholds under the baseline scenario, incorporating the average long-term effects of natural...