{
  "title": "Safe Debt and Uncertainty in Emerging Markets: An Application to South Africa",
  "publication": "IMF Working Papers, December 19, 2014",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2016/12/31/safe-debt-and-uncertainty-in-emerging-markets-an-application-to-south-africa-42546",
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  "summary": "This paper develops a methodology for estimating a safe public debt level that would allow countries to remain below a maximum sustainable debt limit, taking into account the impact of uncertainty.",
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    {
      "heading": "Methodology",
      "content": "- Develops a methodology for estimating a safe public debt level that would allow countries to remain below a maximum sustainable debt limit, taking into account the impact of uncertainty.\n- Uses simulations to assess the probability of remaining below the debt ceiling over the medium-term under uncertainty."
    },
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      "heading": "Key findings and projections",
      "content": "- The analysis implies that fiscal policy should target a debt level well below the debt ceiling to allow space to absorb shocks that are likely to hit the economy.\n- South Africa’s estimated debt ceiling is around 60 percent of GDP.\n- Uncertainty around the debt ceiling estimate is high.\n- Simulations suggest targeting a debt-to-GDP ratio of 40 percent of GDP would allow South Africa to remain below this debt ceiling over the medium-term with a high degree of confidence."
    },
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      "heading": "Policy recommendations",
      "content": "- Fiscal authorities should set debt targets well below the estimated maximum sustainable debt limit to build buffer space for shocks.\n- Use simulation-based analysis that explicitly incorporates uncertainty when setting medium-term debt targets.\n\n---\n\n Content in this bundle\n\n- Wp14231\n  - Wp14231 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Wp14231 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/31/safe-debt-and-uncertainty-in-emerging-markets-an-application-to-south-africa-42546"
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    "Authors: Magnus Saxegaard",
    "Published: December 19, 2014",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781498399432.001",
    "Develops a methodology for estimating a safe public debt level that would allow countries to remain below a maximum sustainable debt limit, taking into account the impact of uncertainty.",
    "Uses simulations to assess the probability of remaining below the debt ceiling over the medium-term under uncertainty.",
    "The analysis implies that fiscal policy should target a debt level well below the debt ceiling to allow space to absorb shocks that are likely to hit the economy.",
    "South Africa’s estimated debt ceiling is around 60 percent of GDP.",
    "Uncertainty around the debt ceiling estimate is high.",
    "Simulations suggest targeting a debt-to-GDP ratio of 40 percent of GDP would allow South Africa to remain below this debt ceiling over the medium-term with a high degree of confidence.",
    "Fiscal authorities should set debt targets well below the estimated maximum sustainable debt limit to build buffer space for shocks.",
    "Use simulation-based analysis that explicitly incorporates uncertainty when setting medium-term debt targets.",
    "**Wp14231**"
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