Fiscal Sustainability in Remittance-Dependent Economies

IMF Working Papers, September 1, 2009

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Investigates the impact of remittances on public debt sustainability.
Details how the traditional debt-to-GDP ratio can be modified to better represent debt sustainability for countries with significant remittance inflows.
Main result: inclusion of remittances into the traditional debt sustainability analysis alters the amount of fiscal adjustment required to place debt on a sustainable path.
Conclusion: While preliminary, results indicate a one-size-fits-all stability analysis may be inappropriate when evaluating fiscal policy stance for countries with different balance of payments characteristics.

Inclusion of remittances in debt sustainability analysis changes the required fiscal adjustment to achieve a sustainable debt path.
The traditional debt-to-GDP ratio can be modified to incorporate remittance inflows to reflect more accurately the sustainability position of remittance-dependent economies.
Results are preliminary and intended to illustrate how balance of payments characteristics affect fiscal stability assessments.

Fiscal stability analyses should be tailored to country-specific external and balance of payments characteristics, particularly remittance dependence.
Policymakers in remittance-dependent economies should consider adjusted debt metrics that incorporate remittance inflows when designing fiscal consolidation strategies.

Authors: Ralph Chami, Yasser Abdih, Amine Mati, Michael T. Gapen
Publication date: September 1, 2009
Series: Working Paper No. 2009/190
Issue: 190
Volume: 2009
Pages: 25
DOI: https://doi.org/10.5089/9781451873375.001
Stock No: WPIEA2009190
ISBN: 9781451873375
ISSN: 1018-5941
Subject: Debt sustainability, Fiscal consolidation, Public debt, Real interest rates, Remittances
Keywords: debt-to-GDP, debt-to-GDP ratio, GDP, remittance, WP

Fiscal Sustainability in Remittance-Dependent Economies, IMF Working Paper No. 2009/190.