IMF Working Papers

Debt-at-Risk

By Davide Furceri, Domenico Giannone, Faizaan Kisat, Waikei R Lam, Hongchi Li

May 5, 2025

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Davide Furceri, Domenico Giannone, Faizaan Kisat, Waikei R Lam, and Hongchi Li. "Debt-at-Risk", IMF Working Papers 2025, 086 (2025), accessed June 22, 2025, https://doi.org/10.5089/9798229010122.001

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

This paper proposes a novel framework for analyzing the risks surrounding the public debt outlook, the “Debt-at-Risk.” It employs a quantile panel regression framework to assess how current macrofinancial and political conditions impact the entire spectrum of possible future debt outcomes. Many of these factors—including financial conditions and economic variables such as initial debt and GDP growth—predict both the expected level and the uncertainty of future debt, implying pronounced variations in risks, especially in the upper tail of the distribution. By combining the roles of these factors, we find that in a severely adverse scenario—the 95th percentile of the future debt distribution, or debt-at-risk—global public debt could be approximately 20 percentage points higher than currently projected. The magnitudes and sources of debt risks vary over time and across countries, with high initial debt amplifying the effects of economic and financial conditions on debt-at-risk. Furthermore, empirical estimates indicate that debt-at-risk is a key variable for predicting fiscal crises.

Subject: Debt service, Emerging and frontier financial markets, External debt, Financial markets, Fiscal policy, Fiscal stance, Public debt

Keywords: Debt, Debt service, Emerging and frontier financial markets, Fiscal stance, Forecasts., Global, Risks

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