Debt Sustainability and Social and Human Development
Imprint
Geneva, United Nations. 1997
Descript
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SUMMARY
This paper presents the methodology for the calculation of financial flows necessary for a country to close its balance-of-payments gap in conjunction with human and social development. It is not the intention of this paper to define an alternative measure of debt sustainability, but rather to calculate the necessary flows to achieve it and close the balance-of-payments, savings and fiscal gaps. The net transfer concept is used, allowing the possibility of substitution between domestic and foreign debt. A link is established for the net transfer among three gaps: the foreign exchange, the savings and the fiscal gaps. Also, a critical presentation of the wrongly called "net" present value calculation for debt relief is given, and a link is made between the present value calculation and the net transfer approach. Furthermore, a stock-of-debt reduction in nominal terms - i.e. calculating the nominal equivalent from the present value in function of the grant element - is calculated by taking into account the gross flows needed to close the gap of both domestic macroeconomic and external financial balances
