Debt Sustainability and Direction of Trade: What Does Africa’s Shifting Engagement with BRIC and OECD Tells Us?

Abstract

This study assesses the evolution of debt sustainability in the Sub Saharan African (SSA) region. It also examines the respective contributions of OECD and BRIC to debt sustainability in the region. We reveal how the external demand for SSA goods and services from OECD and BRIC helps to lower 'debt-to-exports' and 'debt-service-to-exports' ratios, two of the main gauges of debt sustainability. Furthermore, using simple growth accounting, we assess how the net exports by SSA to the OECD and BRIC contributes to the region's GDP growth, and thus indirectly helps to lower the 'debt-to-GDP' ratio, which is another important measure of indebtedness. Our study also compares the 'actual' debt levels of SSA with 'hypothetical' debt levels that simulate the contributions of OECD and BRIC. On the basis of debt sustainability thresholds of the joint IMF-World Bank Debt Sustainability Framework (DSF), we test how the sustainability of SSA debt has evolved overtime and how much the OECD and BRIC contribute to three classes of 'weak', 'medium' and 'strong' debt sustainability targets.

Formation and management of public debt sustainability on the example of the Republic of Kazakhstan and the Russian Federation

“…This approach formed the basis of the IMF debt sustainability indicators system (Debrun et al, 2019;International Monetary Fund and the World Bank, 2017). The LIC DSF indicator system is quite popular in analyzing the debt sustainability of countries and is used in a number of studies: Megersa and Cassimon (2017), Rustomjee (2017), Ford and Roberts (2017), Lang and Presbitero (2018), Pinto (2019), Nya and Onyimadu (2019) and others. Although this method is mainly used to determine the IJOA 30,2 debt sustainability of low-income countries, it is universal and can be applied to other economies, both developing and developed.…”

“…sustainability of countries and is used in a number of studies: Megersa and Cassimon (2017), Rustomjee (2017), Ford and Roberts (2017), Lang and Presbitero (2018), Pinto (2019), Nya and Onyimadu (2019) and others. Although this method is mainly used to determine the debt sustainability of low-income countries, it is universal and can be applied to other economies, both developing and developed.…”