Officials learn more about managing debt sustainability |27 February 2012

They have benefitted from expertise from the International Monetary Fund (IMF) and the World Bank to better assess public debt and come up with more efficient measures to secure the country’s future prosperity.

They did so through a workshop on Friday organised by the Commonwealth secretariat’s debt management programme.

Al Hassan Manraray said the objective is to ensure that Seychelles can in future conduct its own negotiations with lending institutions, independent of the IMF.

He noted that Seychelles has undergone some macro-economic reforms and is now in a good position to manage its debts.

“This analysis is helping the delegates  to assess the debt situation and come up with a way forward  in future negotiations,” he said.

The head of the delegation, Walter Guilpin, said this constitutes a “capacity building exercise” and is to ensure that future debt sustainability management is home grown and not imposed from the outside.

The workshop, held at the International Conference Centre, covered such topics as fiscal sustainaibility, contingent liabilities, currency fluctuations, interpreting debt sustainability ratio, among others.

It also covered issues which can determine whether the country is entering into a crisis zone.
One question is whether the debt ratio is so high that the country is vulnerable to a crisis.  Another is whether the country can generate and maintain the primary surpluses required over the medium term to at least stabilise the debt ratio.

According to the experts at the workshop, studies have shown that the likelihood for debt correction for some countries start when the level rises beyond 40% of GDP.
 
They noted that in general, there is no universally accepted theory indicating what the sustainable debt threshold is because one cannot tell when lenders will stop lending and roll over their debt.

Generally, they said, sustainability depends on history of default, nature of government institutions and the capacity of government to generate primary surplus for “a rainy day”.