Public Debt in Emerging Markets: Is it Too High?

Abstract

Daniel, Callen, Terrones, Debrun and Allard apply a number of different approaches to assess fiscal sustainability in emerging markets. Their analysis suggests that for these countries the sustainable level of public debt is often quite low. They discuss the heavy policy agenda that confronts policies to reduce public debt and cushion against the risks that high debt presents, including: a) reforms to strengthen and broaden the tax base; b) better control of expenditures during economic upswings; c) improving the credibility of fiscal policy; d) reducing exposure to exchange rate and interest rate movements; e) structural reforms to boost growth prospects; f) addressing the risks from contingent and implicit liabilities.