Benchmarking Dynamically Stable Public Debt Trajectories for Low-Income Countries

IMF Working Papers, April 10, 2026

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Develop two complementary approaches for benchmarking public debt trajectories of Low-Income Countries (LICs) to assess their dynamic stability.
Focus on the evolution of overall public debt-to-GDP ratios of reference LICs.
Compare reference LICs with historical experiences of other countries that: (a) have similar characteristics, and (b) are now further down the path of economic development and have not experienced public debt stress events.
Aim: provide insights for debt sustainability analyses for LICs.

Two complementary approaches:
- Direct comparison of public debt-to-GDP ratios between reference LICs and selected historical comparators.
- A novel application of the synthetic control method (SCM).
Emphasis on identifying public debt trajectories that are dynamically stable from a historical perspective.

The paper establishes benchmarking procedures that identify public debt trajectories deemed dynamically stable in historical experience.
These dynamically stable trajectories can provide insights into debt sustainability analyses for LICs.
Use of SCM is highlighted as a novel methodological contribution for constructing counterfactual/comparator trajectories for LICs.

Benchmarked dynamically stable public debt trajectories serve as historical reference points to inform LIC debt sustainability analyses.
The approaches facilitate comparisons with countries that successfully avoided public debt stress events while advancing in economic development.
Results can inform fiscal policy design and fiscal stance assessments in LICs by highlighting historically observed sustainable paths of public debt-to-GDP ratios.