DEBT SUSTAINABILITY A Comparative Analysis of SAARC Countries

The paper analyses the conditions of public and external debt sustainability in four major countries of SAARC, viz. Pakistan, India, Sri Lanka and Bangladesh. For this purpose, traditional debt ratios have been examined by comparing them with threshold levels; and also computed the necessary as well as the sufficient conditions for debt sustainability by using theoretical framework. The results show that all the four countries have been experiencing episodes of unsustainable debt burden due to large fiscal and current account imbalances. It also appears that debt would continue to be an issue periods ahead unless corrective policy measures to address structural imbalances are taken.