Debt Sustainability

Debt sustainability refers to a country's ability to manage its debt without requiring excessive future borrowing or risking default. It means that a government can meet its debt obligations—like interest and principal payments—while maintaining economic stability and funding essential services. Assessing debt sustainability involves looking at indicators such as economic growth, revenue generation, and expenditures. If a country’s debt grows faster than its economy or if it struggles to pay interest, it may face sustainability issues, leading to potential crises. Essentially, it’s about balancing borrowing with the capacity to repay.