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Fiscal Policy

Debt Sustainability Analysis and IMF Policies


Session No.: CT 23.15

Location: Dalian, China

Date: November 13-21, 2023 (1 week)

Delivery Method: In-person Training

Primary Language: English

    Target Audience

    Officials in Exim bank or CDB who play a direct role in lending decisions (loan officers, credit risk analysts); PBC officials engaged in designing swap arrangements with counterpart central banks in LICs; officials from NDRC, China Export and Credit Insurance Corp, CIDCA, Silk Road Fund, and related agencies engaged in lending or aid; officials in the Ministries of Commerce, Foreign Affairs, and Finance who are overseeing lending or aid to LICs; Belt and Road Initiative (BRI) officials.

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    Participants should have a degree in economics or finance and should have reasonably fluency in English (translation will not be available). Experience with debt sustainability analysis, or credit risk analysis would be extremely useful.

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    Course Description

    This course presents an overview of the IMF tools available to assist with debt sustainability analysis for low-income countries, with a special focus on how to use them to assess cases where debt is not sustainable, and resolution is needed. It also covers the global architecture for debt resolution, when necessary.

    Defining public debt, and assessing contingent risks that exist due to gaps in data
    Macro forecasting and realism (with close attention to investment-growth linkages)
    Determination of a country's debt carrying capacity (both external and total debt)
    Categorizing risks for external and total debt, and qualifying them
    Thinking about sustainability
    Different approaches to restoring sustainability
    The international architecture for debt resolution, and IMF's policies when dealing with countries in a debt resolution situation
    The IMF DLP, covering where and how it is applied. Addresses factors evaluated when setting debt limits and discusses examples.

    Lectures will be complemented by hands-on exercises using the Joint IMF-WB LIC DSF template, and participants will at times work in groups to consider scenarios and their implications for the evolution of debt vulnerabilities, and options to mitigate risks. A case study on a debt resolution will also be included.

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    Course Objectives

    Upon completion of this course, participants should be able to:

    • Understand the basic information needed for a debt sustainability analysis
    • Interpret debt sustainability analyses published by the IMF and World Bank for low-income countries
    • Assess debt sustainability and evaluate loss given default
    • Understand options available to creditors to support debt resolution
    • Understand what will happen if a country becomes over-burdened with debt, and what crisis lenders (like the IMF) will need from creditors to be able to help with resolution.
    • Analyze when debt limits are applied in the context of IMF programs.
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