Debt Sustainability and the

Sustainable Development

GoalsESCAP EGM

Daniel MunevarUNCTAD

Key message• Debt Sustainability Analysis (DSA) is a useful tool for short term

financial planning. However, it presents limitations as a tool forthe design of long term development policies (SDG agenda).• In a standard DSA, fiscal concerns take precedence over SDGs.

In many cases, it effectively means sacrificing their active pursuit.• Need to redefine debt sustainability, not as a goal per se, but

relative to the development goals to be achieved.• Need to reassess Public Financial Management (PFM) tools:

integrate SDG planning not as an afterthought but as corecomponent of PFM.

What is a Debt Sustainability Analysis?• Debt Sustainability Analysis:

• Standardized framework designed to assess the risks of debt distress, takingaccount of a country’s capacity to carry debt and its projected debt burdenunder both baseline projections and shock scenarios.

Baseline Macroeconomic

Scenario

Public revenues & expenditures

Debt stock & structure

Financing options

Fiscal Analysis Projected evolution of debt

How we frame a problem matters (I)• DSA provides a framework to asses combinations of fiscal policy that

are consistent with debt sustainability (i.e. expenditure ceilings).• As analysis focuses on requirements to achieve debt sustainability,

SDG requirements fall out of sight.• IMF (2018) on debt financing and the SDGs:

• “For countries with low-to-moderate debt burdens and relativelyfavorable debt servicing profiles, the focus should be onmaintaining debt sustainability”

• Current framework potentially locks countries on low debt, lowinvestment scenarios (UNCTAD, 2016).

How we frame a problem matters (II)• An alternative framework:

• UN Secretary General Report (2005)• Debt sustainability is defined as “the level of debt that allows a country to achieve

the Millennium Development Goals and reach 2015 without an increase in debtratios”.

• Need to focus on SDGs as a starting point of analysis.Assessment of conditions required to meet debt sustainability inthis context.

• UNCTAD DSA SDG assessment tool.

An alternative DSA frameworkDSA

FocusDebt Sustainability

Model outputBudget balance consistent with debt

sustainability

UNCTAD DSA SDG

FocusSDGs & Debt Sustainability

Model output

Evolution of expenditure composition

Evolution of domestic mobilization of resources

Conditions and volumes of external transfers

SDGs included in the modelSDGCrosscutting

issues

SDGInfrastructure

SDGSocialCompact

• 17 goals, 169 targets and 227 indicators• Only 88 have an agreed definition

and data are available• Challenges

• Lack of an integrated assessment• SDG modelled individually /

differences in assumptions• Lack of economy wide assesments

• Cross cutting issues• Input co-dependency

• Breakdown of public and private funding

Country sample selection• Based on regional & income group diversity: 2 per region, per

income groupIncome Level Region Country

Low Income Sub-Saharan Africa Ethiopia

Tanzania

Lower Middle Income Latin America Bolivia

Nicaragua

Sub-Saharan Africa Kenya

Cameroon

Asia Vietnam

Cambodia

Upper Middle Income Middle East & North Africa Algeria

Latin America Ecuador

Asia Thailand

SDG Investments & Debt Sustainability

0

5

10

15

20

25

30

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

%ofG

DP

CambodiaExpenditures(%ofGDP)

PrimaryExpendituresSDG PrimaryExpenditures

19

20

21

22

23

24

25

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

%ofG

DP

ThailandExpenditures(%ofGDP)

PrimaryExpendituresSDG PrimaryExpenditures

Source: UNCTAD - Preliminary estimations

SDG Investments & Debt Sustainability

Source: UNCTAD - Preliminary estimations

79.567.1

20.532.9

2016 2030

ParticipationinTotalExpen

diture

PrimaryExpenditure SDGExpenditure

71.5 68.1

28.5 31.9

2016 2030

ParticipationinTotalExpen

diture

PrimaryExpenditure SDGExpenditure

CambodiaComposition General Government Expenditures

ThailandComposition General Government Expenditures

SDG Investments & Debt Sustainability

Source: UNCTAD - Preliminary estimations

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

%ofG

DP

Cambodia- DSAScenarios

BaselineScenario SDGScenario

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

%ofG

DP

Thailand- DSAScenarios

BaselineScenario SDGScenario

Domestic mobilization of resources & Debt Sustainability

Source: UNCTAD - Preliminary estimations

0.0

5.0

10.0

15.0

20.0

25.0

30.0

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

%ofG

DP

Thailand- GovernmentRevenues(%ofGDP)

RevenueDMR(%ofGDP) Revenues(%GDP)

0.0

5.0

10.0

15.0

20.0

25.0

30.0

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

%ofG

DP

Cambodia- Revenues(%ofGDP)

RevenueDMR(%ofGDP) Revenues(%GDP)

Domestic mobilization of resources & Debt Sustainability

Source: UNCTAD - Preliminary estimations

-10.0%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030%ofG

DP

Thailand- DSAScenarios

BaselineScenario SDGScenario SDGDMR

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

%ofG

DP

Cambodia- DSAScenarios

BaselineScenario SDGScenario SDGDMR

Financing for development & Debt Sustainability

Source: UNCTAD - Preliminary estimations

-20.0%

-10.0%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

%ofG

DP

Cambodia- DSAScenarios

BaselineScenario SDGScenario SDGDMRConcesional SDGDMRGrant

-20.0%

-10.0%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030%ofG

DP

Thailand- DSAScenarios

BaselineScenario SDGScenario SDGDMRConcesional SDGDMRGrant

Financing for development & Debt Sustainability

Source: UNCTAD - Preliminary estimations

Estimated transfers required to achieve SDGs & debt sustainability

Policy implications and future research agenda

Source: UNCTAD - Preliminary estimations

• Policy tools, such as the DSA, must provide policy makers with a comprehensive overview of the implications of the SDG agenda. • Alternative DSA framework:

• Integrate in a single platform fiscal and financial analysis. • Promote ownership of the SDG agenda: targets for domestic mobilization

of resources and budget composition. • Improved allocation of scarce development aid funds • Strengthen partnership for the SDGs

• Ongoing research agenda: • External debt DSA• Investment growth - nexus • ECLAC partnership – Climate change and debt sustainability in the

Caribbean

Thank you!

Comments or questions:daniel.munevar@un.org

Disclaimer:Thisisadraftpresentationbasedonongoingresearch.Anyviews

expressedinthispresentationarethoseofthepresenterandnotnecessarilythose

ofUNCTAD