UNCTAD Virtual Institute for Trade and Development
GDS logo
Home
 
Debt Sustainability Analysis (DSA): An E-Learning Training Course
Module 4
I.(i)Definitions
I.(ii)Issues
II.(i)Framework for MIC
II.(ii)Framework for LIC
III.HIPC Framework
IV.Critique
V.Alternative Approaches
VI.Conclusion

Bibliography

Glossary
Contact
Useful links

Definitions

Sustainability: Debt sustainability is a situation in which the borrower is expected to be able to continue servicing its debts (the 'solvency' condition) without an 'unrealistically large' future correction to the balance of income and expenditure (IMF, 2002).

Solvency: Solvency requires that the current debt plus the present discounted value (PDV) of all expenditures do not exceed the present discounted value of all revenues. Insolvency occurs when the debtor is incapable of raising enough revenues in the long run to meet its debt obligations.

Liquidity: A liquidity crisis occurs if, regardless of whether the solvency condition is satisfied or not, the debtor's liquid assets and available financing are not enough to meet or roll-over its maturing liabilities at a particular point in time. In other words, illiquidity occurs when the debtor is unable to meet its obligations when they come due.

 

 

 

 

 

 

<< Previous/Introduction
Next/Issues>>