Assessing Public Debt Sustainability in Mauritania with a Stochastic Framework

This work presents a stochastic framework for assessing public debt sustainability and applies it to the case of Mauritania. The sustainability assessment projects solvency and liquidity indicators -- public debt stock and gross financing needs rel...

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Bibliographic Details
Main Authors:	Baghdassarian, William, Mele, Gianluca, Pradelli, Juan
Format:	Policy Research Working Paper
Language:	English en_US
Published:	World Bank Group, Washington, DC 2014
Subjects:	ALTERNATIVE INVESTMENT AMORTIZATION AMORTIZATIONS ARREARS AUTOMATIC STABILIZERS BANK DEPOSITS BANK POLICY BASELINE SCENARIO BASIC SERVICES BONDS BORROWING COSTS BORROWING STRATEGIES BUDGET BALANCE BUDGET DEFICIT BUDGET DEFICITS BUDGET LAW BUSINESS CYCLE BUSINESS CYCLES CAPITAL EXPENDITURE CAPITAL EXPENDITURES CAPITAL PROJECTS CAPITAL SPENDING CASH BALANCES CASH TRANSFERS CENTRAL BANK CENTRAL GOVERNMENT CIVIL SERVANTS COMMODITY PRICES CREDIT SPREADS CREDITORS CURRENCY CURRENCY DEPRECIATION CURRENCY RISK CYCLICAL FACTORS DEBT DATA DEBT DYNAMICS DEBT ISSUANCE DEBT LEVELS DEBT MANAGEMENT POLICIES DEBT OBLIGATIONS DEBT POLICIES DEBT PROJECTIONS DEBT RATIO DEBT REDUCTION DEBT RELIEF DEBT REPAYMENT DEBT SERVICE DEBT STOCKS DEBT SUSTAINABILITY DEBTS DEFICIT FINANCING DEMAND FOR FUNDS DEVELOPING COUNTRIES DOMESTIC BORROWING DOMESTIC DEBT DOMESTIC INTEREST RATES DOMESTIC MARKET DOMESTIC REVENUE ECONOMIC DEVELOPMENT ECONOMIC DOWNTURN ECONOMIC GROWTH EMERGING MARKETS EXCHANGE RATE EXCHANGE RATES EXPENDITURE EXPENDITURE PRIORITIES EXPENDITURES EXTERNAL BORROWING EXTERNAL DEBT EXTERNAL GRANTS EXTERNAL SHOCKS FINANCIAL ASSETS FINANCIAL COSTS FINANCIAL INSTITUTIONS FINANCIAL INSTRUMENTS FINANCIAL LIABILITIES FINANCIAL MANAGEMENT FINANCIAL MARKETS FINANCIAL OBLIGATIONS FISCAL CONSOLIDATION FISCAL DEFICIT FISCAL DISCIPLINE FISCAL FRAMEWORK FISCAL MANAGEMENT FISCAL PERFORMANCE FISCAL POLICIES FISCAL POLICY FISCAL POLICY FRAMEWORK FISCAL PRUDENCE FISCAL REVENUE FISCAL RISKS FISCAL VULNERABILITY FLOATING INTEREST RATES FLOATING RATE FOREIGN CURRENCIES FOREIGN CURRENCY FOREIGN CURRENCY RISK FOREIGN DEBT FOREIGN EXCHANGE FOREIGN LOANS GOVERNMENT BUDGET GOVERNMENT DEBT GOVERNMENT DEPOSITS GOVERNMENT POLICIES GOVERNMENT REVENUE GOVERNMENT SECURITIES GOVERNMENT SECURITIES MARKET GRACE PERIOD GROSS PUBLIC DEBT GROWTH RATE HIGHER INTEREST HIGHER INTEREST RATES HUMAN DEVELOPMENT INDEBTEDNESS INFLATION INFLATION RATE INFLATION RATES INFRASTRUCTURE PROJECTS INSTRUMENT INTEREST COST INTEREST EXPENDITURE INTEREST PAYMENT INTEREST PAYMENTS INTEREST RATE RISK INTERNATIONAL BANK INTERNATIONAL DEVELOPMENT INTERNATIONAL INVESTORS INVESTMENT EXPENDITURE INVESTMENT POLICIES INVESTMENT POLICY INVESTMENT PROJECTS INVESTMENT SPENDING INVESTMENT STRATEGIES ISSUANCE ISSUANCES LABOR MARKET LENDERS LEVEL OF DEBT LEVEL OF RISK LIABILITY LIQUID ASSETS LIQUIDITY LIQUIDITY RISKS LOAN LOAN CONTRACTS LOAN MARKET LOCAL BANKS LOCAL CURRENCY MACROECONOMIC ENVIRONMENT MACROECONOMIC PROJECTIONS MACROECONOMIC RISK MACROECONOMIC STABILITY MACROECONOMIC UNCERTAINTIES MACROECONOMIC UNCERTAINTY MACROECONOMIC VARIABLES MACROECONOMIC VOLATILITY MARKET CONSTRAINTS MARKET FOR GOVERNMENT SECURITIES MATURITIES MATURITY MINISTRY OF FINANCE MONETARY FUND MONETARY POLICY NATURAL RESOURCES NEGATIVE VALUES NET BORROWING NET PUBLIC DEBT OIL RESERVES OUTSTANDING STOCKS POLICY DECISIONS POLITICAL ECONOMY PORTFOLIO PORTFOLIO ALLOCATION PORTFOLIO ALLOCATIONS PORTFOLIOS PRINCIPAL PAYMENTS PROGRAMS PUBLIC CAPITAL PUBLIC DEBT PUBLIC DEBT INSTRUMENTS PUBLIC DEBT MANAGEMENT PUBLIC DEBT MANAGERS PUBLIC DEBT STOCK PUBLIC FINANCES PUBLIC FINANCIAL MANAGEMENT PUBLIC INVESTMENT PUBLIC INVESTMENT SPENDING PUBLIC SPENDING REAL EXCHANGE RATE REAL INTEREST REAL INTEREST RATE REPAYMENT REPAYMENT CAPACITY RESERVE RETURN REVENUE SOURCES RISK MANAGEMENT RISK PROFILE SANITATION SECURITY MARKET SHORT MATURITIES SHORT-TERM GOVERNMENT SECURITIES SOLVENCY SOVEREIGN DEBT SOVEREIGN LIABILITY SUSTAINABILITY ANALYSIS T-BILLS T-BOND T-BONDS TAX TAX BASES TAX REVENUES TOTAL EXPENDITURE TOTAL PUBLIC EXPENDITURE VALUATION
Online Access:	http://documents.worldbank.org/curated/en/2014/11/20346371/assessing-public-debt-sustainability-mauritania-stochastic-framework-assessing-public-debt-sustainability-mauritania-stochastic-framework http://hdl.handle.net/10986/20628

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Summary:	This work presents a stochastic framework for assessing public debt sustainability and applies it to the case of Mauritania. The sustainability assessment projects solvency and liquidity indicators -- public debt stock and gross financing needs relative to GDP -- for 2014-23. The analysis uses deterministic scenarios and stochastic simulations to analyze policy options and fiscal risks. The study relies on simple econometric models to generate forecasts of key macroeconomic variables driving the public debt dynamics and to compute debt-distress probabilities and debt thresholds. The study builds on basic techniques to determine optimal portfolios suitable as benchmarks for public debt management. A main result is that, if Mauritania maintains a strong growth performance and pursues sound policies to balance the budget and take advantage of concessional financing opportunities, it could reduce the public debt from 74 percent of GDP in 2013 to 30 percent by 2023, and the gross financing needs from 12 percent of GDP to 4 percent. Further scaling up capital spending is likely to deteriorate public debt sustainability because the estimated (marginal) growth-dividend is small. A more promising avenue would be to improve the quality of public investment and institutions, as opposed to the volume of capital expenditure. Different debt strategies can significantly affect the liquidity needs and the on-budget interest bill. But it is the fiscal policy geared toward balanced budgets that ultimately would permit Mauritania to improve the solvency indicators, and thus the public debt sustainability.

Assessing Public Debt Sustainability in Mauritania with a Stochastic Framework

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