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The IMF Debt Sustainability Analysis: Issues and Problems

  • Martin Guzman EMAIL logo and Daniel Heymann


This paper reviews the IMF DSA (Debt Sustainability Analysis) framework. We first examine the concept of debt sustainability, and argue that the evaluation exercise necessarily entails putting into question market expectations embodied in yield spreads. When the views of the analyst on the capacity of debt repayment differ from the ones reflected in market interest rate premiums, the use of market interest rates for assessing debt sustainability leads to an inconsistency that will in turn bias the assessment. We then show that IMF projections for assessing debt sustainability have been repeatedly biased, which may have contributed to distort the timing of sovereign debt restructurings and the consequent processes of renegotiation. We conclude with a discussion on how the existing DSA framework could be improved.

JEL: E37; F34; G01; H12; H63; H68

Corresponding author: Martin Guzman, Department of Economics & Finance, Columbia University GSB, IIEP-BAIRES (Universidad de Buenos Aires-CONICET), UNLP, and CIGI, e-mail:


This paper is based on the discussion from the authors on the IMF Frameworks for Assessing Debt Sustainability at a CIGI-IPD Conference on Sovereign Debt Restructuring at Columbia University. We are thankful to the participants of that conference, to participants at the Economics Seminar of the Javeriana University of Bogota, the RIDGE workshops at the Central Bank of Uruguay and the Universidad de Buenos Aires, to the Deputy Chief of the IMF Debt Policy Division Ali Abbas for his response to our discussion, to Santiago Camara, Joseph Stiglitz, Stavros Zenios and Sergio Chodos for valuable comments and suggestions, and to Luis Morano for excellent research assistance. Martin Guzman is thankful to the Institute for New Economic Thinking for financial support.


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Published Online: 2016-1-19
Published in Print: 2015-12-1

©2015 by De Gruyter

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