Debt stabilisation

Debt stabilisation is a term in finance denoting a necessary condition in which the rate of growth of economy exceeds the interest rate or cost of public borrowings, which makes the debt-GSDP ratio likely to be stable provided primary balances are either zero or positive or are moderately negative.

Given the rate spread (GSDP growth rate - interest rate) and quantum spread (Debt rate spread), debt sustainability condition states that if quantum spread together with primary deficit is zero, debt-GSDP ratio would be constant or debt would eventually stabilise.

On the other hand, if primary deficit together with quantum spread turns out to be negative, debt-GSDP ratio would be rising and in case it is positive, debt-GSDP ratio would eventually be falling.

Nearby pages
Debt sustainablility, Decadence, Decameron, Decay, Deccan