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Public Debt Sustainability and the Proposed FY 2023 National Budget

This Briefing Note provides a discussion on the public debt sustainability analysis with highlights on the FY 2022-2028 Medium-Term Fiscal Framework. In the analysis of key debt indicators, key findings show that the government’s debt level is still sustainable and the overall risk of debt sustainability is low. In decomposing debt-creating flows, the main drivers in the movements of the debt-to-GDP ratio are the primary deficit and real GDP growth. The debt dynamics are favorable as the projected growth rates are seen as greater than the interest rates. With the resulting growth rates exceeding the interest rates combined with the estimated DSPB (-3.3% of GDP), it can be assessed that the government has some elbow room to borrow and still stabilize the debt-to-GDP ratio over the medium term. However, the current debt profile may be broadly sound and vulnerabilities are at low risk, but the level of debt may still be influenced by uncertainty in macroeconomic variables.


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