Debt Sustainability Analysis, perhaps needless to say, is of crucial importance to countries going through severe debt crisis. And it is so because of primarily two reasons: first, to ensure what would be a viable, sustainable fiscal framework for the country, post crisis; second, to determine the size of the haircut when restructuring the foreign debt, so as to make it compatible with debt sustainability and the ability to service the foreign debt.
In this contest, this note has two aims. The first is to derive a simple, straightforward formula for debt sustainability. And the second is to apply it using actual, reasonable numbers to the case of Lebanon.
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