Sovereign debt management

This chapter presents a brief overview of debt management in developing countries. It also presents the link between external debt and economic growth. The chapter provides the institutional framework for government debt management and a discussion on renegotiating debt contracts, discusses debt-relief policies, designing incentives, sovereign debt restructuring, and a risk management framework for a government debt portfolio. It focuses on debt sustainability analysis and medium-term debt strategy. Sovereign debt management, in simple terms, covers how to ensure that the level and growth rate of public debt is sustainable. One of the key components of public debt is the share of external debt in total debt. At what level external debt becomes a concern for economic growth depends on three broad factors: level of external debt-to-gross domestic product ratios, low primary surplus, and varying borrowing cost, which are supported by the debt-overhang hypothesis.