There are several concerns relating to the DSFs that need to be kept in mind and taken account of in determining a country’s strategy for mobilizing external resources. Many of them are recognized and described in the Framework Paper and mentioned again in this paper to complete the description of the DSF. | DEBT SUSTAINABILITY FRAMEWORK FOR LOW INCOME COUNTRIES POLICY AND RESOURCE IMPLICATIONS Paper submitted for the G-24 Technical Group Meeting Washington . September 27-28 2004 Part 7 Nihal Kappagoda Research Associate The North-South Institute Nancy C. Alexander Director Citizen s Network on Essential Services Concerns and Issues Debt Sustainability Framework 1. There are several concerns relating to the DSFs that need to be kept in mind and taken account of in determining a country s strategy for mobilizing external resources. Many of them are recognized and described in the Framework Paper and mentioned again in this paper to complete the description of the DSF. 2. There could be situations when the selected debt indicators are above the threshold values. It is likely that in such situations there would be World Bank and or IMF supported stabilization programs. They would normally call for reduced levels of borrowing on unaffordable terms and for more concessional borrowing and grant financing. The reduction of the debt ratios to threshold levels is likely to be gradual as new borrowing on non-concessional terms may have to be made if concessional funds including grants are not available in the required amounts. 3. A different set of considerations may prevail if only a single debt indicator is above the threshold value in which case it is necessary to examine whether this is due to a debt or other problem. A debt service problem identified by comparing with GDP exports or government revenue may all be affected by statistical issues. Repayment capacity judged by exports may need to take account of high or fluctuating levels of workers remittances. Similarly government revenue may be affected by poor tax administration requiring action on widening the tax base and more effective revenue collection. Thus borrowing decisions based on a single indicator should take account of the non-debt factors that could affect the level of the indicator before action is taken .
