The DSA follows the IMF and World Bank Staff Guidance Note on the Application of the Joint IMF-World Bank Debt Sustainability Framework for Low-Income Countries, dated November 7, 2013 (SM/13/292).
See the most recent IMF Staff Report on WAEMU common policies: http://www.imf.org/external/pubs/ft/scr/2015/cr15100.pdf
The domestic primary fiscal balance is the authorities’ primary tool for short term fiscal policy, given interest payments and multi-year infrastructure investment plans.
Togo’s quality of policies and institutions, as measured by the average World Bank’s Country Policy and Institutional Assessment (CPIA) for the period 2011–13 (2.98), places it as a “weak performer”. The corresponding indicative thresholds for the external debt indicators are 30 percent for the NPV of debt-to-GDP ratio, 100 percent of the debt-to-exports ratio, 200 percent for NPV of debt-to-revenue ratio, 15 percent for the debt service-to-exports ratio, and 18 percent for the debt service-to-revenue ratio. The corresponding indicative benchmark for total public debt to GDP ratio is 38 percent.
The public debt benchmark was introduced in the DSA framework in the 2013 review of the Debt Sustainability Framework. Similar to the thresholds for PPG external debt, this benchmark varies depending on a country’s CPIA score and designates levels above which the risk of public debt distress is heightened.
The non-debt-creating flows shock is a one-time increase in other debt-creating flows amounting to 10 percent of GDP in the second year of the projection period. The real depreciation shock is a one-time 30 percent nominal depreciation of the domestic currency in the first year of the projection period.
Staff and the authorities discussed the differences between the WAEMU convergence criterion of debt-to-GDP ratio and the sustainability indicators under the LIC-DSA framework. Specifically, the 70 percent debt-to-GDP ratio criterion for WAEMU convergence is not directly comparable to the debt-to-GDP ratio debt burden indicator in the LIC-DSA. The former is measured in nominal terms, while the latter is measured in present value terms. Also, apart from the debt-to-GDP ratio, assessment of debt sustainability under the LIC-DSA takes into account other debt burden indicators, such as debt-to-revenue and debt-to-exports ratios, a country’s specific policy and institutional environment, and country-specific risks.