Approved by: Prepared by the staff of the International Marcello Estevão and Hassan Zaman Development Association (IDA) and the (IDA), Krishna Srinivasan (IMF) International Monetary Fund (IMF). SOLOMON ISLANDS: JOINT BANK-FUND DEBT SUSTAINABILITY ANALYSIS Risk of external debt distress Moderate Overall risk of debt distress Moderate Granularity in the risk rating Substantial space to absorb shock Application of judgement No External and overall public debt have increased as a result of the COVID-19 pandemic, but Solomon Islands remains at moderate risk of external and overall debt distress. 1 All external debt indicators remain below the relevant indicative thresholds under the baseline scenario but the PV of external debt-to-exports ratio breaches its threshold under an export shock scenario. The PV of public debt-to-GDP ratio remains below the indicative threshold under the baseline scenario but breaches the threshold under the commodity price and real GDP growth shock scenarios. A tailored natural disaster shock of similar scale to the largest historical shock would also cause a significant deterioration in the debt trajectory. While the Debt Sustainability Analysis (DSA) suggests that there is substantial space to absorb shocks, public debt is projected to increase significantly and growth is expected to remain subdued over the medium-term. Solomon Islands also faces significant fiscal liquidity challenges stemming from the current low level of the government cash balance. The debt is vulnerable to export shocks, calling for the need to broaden the export base. With pronounced uncertainty around the economic outlook, debt sustainability needs to be anchored by a prudent fiscal policy to rebuild fiscal buffers, while creating fiscal space for meeting development spending needs through stronger revenue mobilization measures and expenditure rationalization 1 1 >>> 1. The coverage of public sector debt used in this report is central government debt, central government-guaranteed debt, and central bank debt, which is borrowed on behalf of the government. As of end-August 2021, no central government-guaranteed debt had been recorded, and the outstanding debts to the IMF stood at SDR21.45 million (US$30.6 million; 1.9 percent of GDP). The Ministry of Finance and Treasury’s State-Owned Enterprise (SOE) Unit monitors SOE performance and collects basic financial statistics which suggests no outstanding SOE debt. Due to the lack of concrete information, subnational debt and non-guaranteed SOE debt are not included in the analysis. Subsectors of the public sector Check box 1 Central government X 2 State and local government 3 Other elements in the general government 4 o/w: Social security fund 5 o/w: Extra budgetary funds (EBFs) 6 Guarantees (to other entities in the public and private sector, including to SOEs) X 7 Central bank (borrowed on behalf of the government) X 8 Non-guaranteed SOE debt 2. Public and Publicly Guaranteed (PPG) external debt stood at US$150.9 million (9.6 percent of GDP) as of end-2020, an increase of 3.5 percent of GDP from 2019 (Table 1) . The Asian Development Bank (ADB) and the International Development Association (IDA) are the largest creditors, accounting for about 92 percent of total external debt. In 2020, an increase in external debt was mainly due to the IMF Rapid Credit Facility/Rapid Financing Instrument (RCF/RFI) (US$28.84 million, 1.8 percent of GDP), while new external borrowing from the IDA and the ADB also contributed to the large increase in public external debt. 3. Public debt was 13.1 percent of GDP as of end-2020, an increase of 4.9 percent of GDP from 2019 (Table 2).2 Public domestic debt increased to SI$451.6 million (3.5 percent of GDP) at end-2020. Negative real GDP growth and an increase in primary expenditure after the COVID-19 pandemic accounted for the pick-up in debt. The government issued SI$180 million domestic development bonds to finance the COVID-19 response in 2020, purchased by the Solomon Islands National Provident Fund (NPF), Solomon Power, and the Port Authority.3 Domestic payment arrears (estimated at SI$100 million, 0.8 percent of GDP) reportedly re-emerged at the end of 2020, reflecting Public Financial Management weaknesses and increased liquidity pressures.4 2 3 4 2 >>> 4. Both public domestic and external borrowings are expected to grow in 2021. New domestic and external borrowing is projected to be around SI$625 million in 2021. Government has issued four development bonds (SI$120 million with NPF, SI$50 million with Pan Oceanic Bank, and SI$120 million with Solomon Power and Port Authority). Public debt is projected to increase to 16.2 percent of GDP in 2021. The government currently sets a limit for the public debt-to-GDP ratio at 35 percent in nominal terms and, in the 2021 budget, has set an annual borrowing limit at SI$350 million. There are no explicit and implicit contingent liabilities from state-owned enterprises.5 The government plans to provide 50 percent guarantee to Solomon Power’s loan to the electricity trans mission line for the Tina hydro project (US$10.6 million) in 2022. 5. The assumptions in the baseline scenario are consistent with macroeconomic framework. The discount rate used to calculate the net present value of external debt remains at 5 percent. The main assumptions are: • Following a fall in real GDP in 2020 by 4.3 percent, real GDP growth is expected to remain subdued at 0.4 percent in 2021. The relatively slow vaccine rollout and pandemic-related uncertainties are expected to delay full border reopening and international travel and therefore slow down the recovery in the near term. As borders reopen, growth is projected to pick up, driven by a pipeline of infrastructure projects, including for the 2023 Pacific Games and other priority projects as envisaged in the National Infrastructure Investment Plan (NIIP), as well as investments in other resource sectors. Despite this, the medium-term, growth outlook remains subdued, averaging at 2.8 percent over 2021–31, reflecting inter alia decline in traditional growth drivers (logging) and high vulnerability to the natural disasters. 5 3 >>> • Inflation (measured by the GDP deflator) is projected to increase, also reflecting the impact of higher global commodity prices, and average 4.1 percent during 2021–31. • The non-interest current account deficit is projected to remain large at 9.8 percent of GDP on average over 2021–31, driven by high import growth related to expected infrastructure investments and a projected trend decline in logging exports. Agricultural exports have remained weak due to climate-related shocks. Over the medium-term, official grants are projected to decline and average 1.6 percent of GDP, while FDI inflow will remain around 2.6 percent of GDP. • Fiscal outlook: A fall in revenue and a COVID-related increase in spending has widened the primary deficit from 0.5 percent of GDP in 2019 to 2.2 percent of GDP in 2020, financed by grants, concessional loans, and the issuance of domestic development bonds. Going forward, fiscal deficits are expected to persist, driven by continued weak revenue trends, including from decline in revenue from logging and other international trade taxes, and large development spending needs to achieve SDGs and climate adaptation goals. The primary deficit is projected to remain elevated at a ten- year average of 3.3 percent of GDP. • Fiscal policy aims to support growth through increased public investment : Solomon Islands is a lower-middle income country faced with a lack of quality infrastructure. However, a large public investment program in roads, air transport, telecommunications, sporting facilities and energy sectors is anticipated to drive growth. The overall goal of the investment program – which is largely donor-funded – aims to improve connectivity and sustainable energy provision. Increased connectivity and transport facilities may crowd in private investment. Uncertainties remain, however, regarding implementation capacity and COVID-related travel restrictions. Furthermore, the implementation of the infrastructure pipeline is expected to significantly increase public debt, pointing to the need to boost medium-term potential growth and prioritizing investment projects that build resilience to natural disasters. • External and domestic financing: New external loan disbursements to finance large infrastructure are expected to increase to about 3 percent of GDP over the next three years, supported by multilateral institutions (e.g., World Bank and ADB) and bilateral donors (e.g., JICA, Australia, and New Zealand). From 2026 onwards, the level of new net external borrowing is expected to remain around 2.2 percent of GDP. The majority of external financing is assumed to be concessional with the average grant element of new borrowing around 45 percent. The government is expected to be committed to its annual T-bill issuance limit of SI$100million, while gradually increasing development bonds issuance in line with the Medium-Term Debt Management Strategy (MTDS). As a result, the public debt profile would shift gradually toward domestic financing. The share of domestic financing is temporarily elevated at 67 percent in 2021 owing to the issuance of domestic development bonds (SI$290 million) and slow implementation of donor-funded projects due to the border closure. The redemption profile of domestic debt reflects the rollover of T-bills every year and an updated amortization schedule of development bonds, which peaks in 2032 when the 15- year development bond (SI$120 million, issued in 2017) matures. 4 >>> 6. The major difference of assumptions between the previous DSA and the current DSA relate to weaker economic performance due to the pandemic in 2020 and 2021 . The current DSA assumes; lower growth rates and fiscal revenue collection than the previous projection, reflecting subdued production, border closure and pandemic-related uncertainties; lower primary expenditure, reflecting under-execution of capital expenditure; lower exports, reflecting weaker than expected agricultural exports and a decline in logging export; and lower imports due to weaker construction and domestic demand. Previous DSA Current DSA Current vs. Previous 2021-26 2021-31 2021-26 2021-31 2021-26 2021-31 Real GDP growth, percent 3.6 3.4 2.5 2.8 -1.1 -0.7 Inflation (GDP deflator), percent 3.2 3.3 4.3 4.1 1.0 0.8 (In percent of GDP) Revenue and grants 32.5 31.7 29.8 29.3 -2.8 -2.4 Primary expenditure 36.4 35.2 32.9 32.6 -3.4 -2.5 Primary balance -3.8 -3.5 -3.1 -3.3 0.7 0.1 Exports of goods and services 36.0 35.1 25.6 23.3 -10.4 -11.8 Imports of goods and services 48.3 46.3 40.1 37.9 -8.2 -8.4 Non-interest current account balance -11.1 -9.6 -9.5 -9.8 1.6 -0.2 7. The realism tools suggest that the macroeconomic and fiscal assumptions are reasonable. The external and public PPG debt trajectory in the current DSA locates slightly below the previous DSA 5 >>> (Figure 3), reflecting the difference in initial debt level. The projected fiscal adjustment lies towards the bottom part of the distribution of LIC’s past adjustment episodes, reflecting the projected increase in development spending (Figure 4, left). Staff’s real GDP growth projection during 2021–23 is higher than the growth path projected by the realism tool based on the assumed fiscal multiplier (Figure 4, right). The difference is mainly explained by the significant rebound in growth after the deep COVID-19 recession, reflecting a resumption of economic activities and recovery in global demand. The low elasticity of growth to fiscal impulse for 2021–23 indicates a limited fiscal multiplier effect. 8. Solomon Islands’ debt-carrying capacity is weak. The Composite Indicator (CI) index is 2.651, indicating that the debt-carrying capacity is assessed to be weak in the LIC-DSA framework. The CI score is based on the October 2021 World Economic Outlook (WEO) and 2020 World Bank’s CPIA. The classification was downgraded from “moderate” in the 2019 DSA to “weak” based on data in the April and October 2021 WEOs and 2019 CPIA. 9. Based on the CI rating, Solomon Islands’ debt is assessed against the following thres holds. The relevant indicative thresholds for the category are 35 percent for the PV of debt-to-GDP ratio, 30 percent for the PV of PPG external debt-to-GDP ratio, 140 percent for the PV of PPG external debt-to- exports ratio, 10 percent for the PPG external debt service-to-exports ratio, and 14 percent for the PPG external debt service-to-revenue ratio. 6 6 >>> Country Solomon Islands Country Code 813 Debt Carrying Capacity Weak Classification based on Classification based on Classification based on the Final current vintage the previous vintage two previous vintage Weak Weak Weak Weak 2.651 2.645 2.681 Applicable thresholds APPLICABLE APPLICABLE EXTERNAL debt burden thresholds TOTAL public debt benchmark PV of total public debt in PV of debt in % of percent of GDP 35 Exports 140 GDP 30 Debt service in % of Exports 10 Revenue 14 10. Tailored stress tests on natural disasters and volatile commodity prices are applied: • Commodity price shock: the scenario considers a sudden one standard deviation decline in fuel and non-fuel prices, associated with reductions in real GDP growth and revenues, which are assumed to gradually recover over six years. • Natural disaster shock: Solomon Islands, which is defined as small developing natural disaster- prone state, is automatically subject to the standard natural disaster shock.7 The default parameter setting of this shock was modified to reflect Solomon Islands-specific factors based on the findings of staff’s research on the impact of natural disasters.8 The study is based on EM-DAT, an international disaster database, which shows that historically the largest damage from natural disasters in Pacific Island countries during 1980–2016 was estimated at 14 percent of GDP. Based on this analysis, the natural disaster shock was adjusted to a 14 percent of GDP shock to GDP, associated with reductions in real GDP growth and exports by 2.67 and 8.12 percentage points, respectively. 7 >>> 11. A stress test for the combined contingent liability shock uses the default setting for implicit SOE and financial market debt. The stress test incorporates implicit contingent liabilities amounting to 7 percent of GDP, which comprises 2 percent of GDP of non-guaranteed SOE debt and 5 percent of potential liabilities stemming from the financial market. 1 The country's coverage of public debt The central government, central bank, government-guaranteed debt Default Used for the analysis Reasons for deviations from the default settings 2 Other elements of the general government not captured in 1. 0 percent of GDP 0 3 SoE's debt (guaranteed and not guaranteed by the government) 1/ 2 percent of GDP 2 4 PPP 35 percent of PPP stock 0 PPP capital stock data is not available. 5 Financial market (the default value of 5 percent of GDP is the minimum value) 5 percent of GDP 5 Total (2+3+4+5) (in percent of GDP) 7.0 1/ The default shock of 2% of GDP will be triggered for countries whose government-guaranteed debt is not fully captured under the country's public debt definition. 12. Under the baseline scenario, all external PPG debt indicators remain below the policy relevant thresholds for the next ten years (Table 1, Figure 1a).9 The PV of PPG external debt-to GDP ratio is expected to grow gradually from 7 percent in 2020 to 13.8 percent in 2031 due mainly to new disbursements for key infrastructure projects (Table 3). As Figure 3 shows, the main driver of debt dynamics is a deterioration of the current account balance. PPG external debt service indicators are projected to moderately rise in the near-term when the repayment of IMF emergency financing is due. 13. The standardized stress test shows that an export shock has the largest negative impact on the external debt trajectory.10 The PV of PPG external debt-to-export ratio is expected to breach the indicative threshold under the export shock scenario (Table 3). High sensitivity of external debt sustainability to export shock suggests the need to expand the export base, as logging activity is expected to substantially decline in the medium term. Adding local value in agriculture and investments in fisheries and mining could support the potential growth in exports. The “other flows” shock also causes a significant increase in the PV of debt-to-GDP ratio, suggesting that Solomon Islands is also vulnerable to changes in donors’ external loans. Other shocks, including to real GDP growth, primary balance, and one-time 30 percent depreciation, do not lead to a breach of any debt thresholds. Net debt creating flow is negative under the historical scenario, reflecting smaller current account deficit and larger official grants in the last ten years on average. 9 10 8 >>> 14. A tailored natural disaster shock causes all the debt trajectories for each debt indicator to move upward. Though the DSA assumes a one-off shock that takes place in 2022, there is a possibility that multiple severe natural disasters could occur within a 10-year timeframe. Staff’s work shows that there is a probability of around 13.5 percent of a disaster each year of a magnitude of more than 3 percent of GDP or impacting 5 percent of the population. Multiple natural disasters would have a larger cumulative effect on debt sustainability through lower long-term growth and higher borrowing needs for post-disaster reconstruction efforts. 15. Under the baseline scenario, the PV of public debt-to-GDP ratio does not breach the 35 percent benchmark (Table 2, Figure 2). However, the nominal public debt-to-GDP ratio is projected to reach the authorities’ policy threshold of 35 percent in nominal terms by 2029.11 As Figure 3 indicates, the increase is mainly driven by a high primary deficit. The public debt service-to-revenue ratio is projected to moderately rise over the medium term. 16. The sensitivity analysis shows that a shock to commodity prices leads to the largest increase in debt by 2031 (Figure 2, Table 4). The PV of debt-to-GDP ratio would breach the indicative threshold by 2026 due to commodity price shock. As a small exporter, Solomon Islands is highly exposed to international price fluctuations and Chinese market demand for logs. Public debt sustainability is also sensitive to a slowdown in real GDP growth. The country’s high vulnerability to shocks in commodity prices and real GDP growth highlights the urgency of economic diversification and finding new growth drivers. Fisheries and mining have potential as future growth drivers but require additional investment in infrastructure and production facilities. Shocks in commodity prices and real GDP growth have durable impacts on public debt service. Like external DSA, net debt creating flow is negative under the historical scenario, reflecting a primary surplus in the last ten years on average. 17. Tailored natural disaster and combined contingent liability shocks result in a deterioration in debt sustainability. In the natural disaster shock scenario, the debt service-to-revenue ratio is expected to significantly increase compared to the baseline one year after the shock and the PV of public debt-to- GDP ratio would breach the threshold of 35 percent by 2027. In the combined contingent liability shock scenario, the trajectory of the PV of public debt-to-GDP ratio moves upwards by 4-6 percentage points from the baseline. These results highlight the importance of rebuilding fiscal buffers against external shocks, including natural disasters, and contingent liability shocks. 18. The DSA analysis suggests that Solomon Islands’ risk of external debt distress is moderate. All external debt indicators remain below the relevant indicative thresholds under the baseline scenario. However, public debt is projected to increase significantly while growth is expected to remain subdued over the medium-term. An export shock scenario would result in a significant deterioration in external debt sustainability. Even though debt service indicators are below their thresholds in most cases, maximizing concessional loans would help keep the debt burden contained. Figure 5 suggests that there is substantial space to absorb shocks, reflecting a current low level of external debt.12 However, the pandemic related deterioration in the fiscal position, as reflected in the decline in government cash balance, as well as 9 >>> constraints to absorptive capacity call for caution in debt accumulation.13 With pronounced uncertainty around the economic outlook, debt sustainability needs to be anchored by a prudent fiscal policy to rebuild fiscal buffers, while creating fiscal space for meeting development spending needs through stronger revenue mobilization measures and expenditure rationalization. 19. The DSA suggests that overall risk of debt distress is moderate with substantial space to absorb shocks. However, given the projected widening of fiscal deficits, the scenarios involving shocks to commodity prices and real GDP growth would significantly worsen public debt sustainability. Both the tailored natural disaster and combined contingent liability shocks would also deteriorate debt sustainability significantly. These vulnerabilities call for measures to rebuild fiscal buffers, broaden the export base, boost medium-term potential growth and prioritizing investment projects that build resilience to natural disasters. 20. The public debt portfolio faces limited refinancing and interest rate risks .14 About 70 percent of public debt is external loans that are contracted at highly concessional terms. 15 There is rollover risk associated with T-bills (which account for about 17 percent of domestic debt) but the risk is limited given excess market liquidity and high market demand for government securities. Given high liquidity in the banking system, yields of government securities have remained broadly constant over the past years. This is the case for both T-bill auctions (e.g. yields for one-year T-bills have amounted to around 1.9 percent) and the negotiated coupon rate on the development bonds, thereby limiting interest rate risk. 21. Authorities broadly agreed with staff’s analysis of Solomon Islands’ debt sustainability. They underscored their firm commitment to the Medium-Term Debt Strategy, including increasing the share of financing from the domestic debt market. Authorities stressed their intention to manage debt within the 35 percent of GDP threshold in the medium-term and appreciated the staff’s analysis of the fiscal anchor. Authorities aim to gradually rebuild fiscal buffers by increasing transfers to the debt service account to meet domestic payment obligations. While agreeing that there is room for additional spending in the near term to accelerate the economic recovery, authorities broadly agreed with the need for revenue and expenditure measures to lower fiscal deficits looking forward. 10 >>> Actual Projections Average 8/ Historical Projections 2018 2019 2020 2021 2022 2023 2024 2025 2026 2031 2041 External debt (nominal) 1/ 7.1 7.0 10.6 11.7 13.6 15.4 16.8 17.8 18.8 23.6 27.2 11.6 18.5 Definition of external/domestic debt Residency-based of which: public and publicly guaranteed (PPG) 6.3 6.1 9.6 10.7 12.4 14.2 15.5 16.5 17.5 22.1 25.4 8.6 17.2 Is there a material difference between the Yes two criteria? Change in external debt -0.3 -0.2 3.6 1.2 1.8 1.9 1.3 1.0 1.0 0.8 0.0 Identified net debt-creating flows 1.6 8.0 1.4 3.7 9.3 8.8 6.7 6.0 6.5 7.5 8.6 -0.2 7.0 Non-interest current account deficit 3.0 9.7 1.5 5.0 12.2 12.0 9.6 8.8 9.3 10.5 11.4 3.5 9.8 Deficit in balance of goods and services 4.3 10.3 8.2 11.2 17.5 16.7 14.3 13.4 13.7 15.4 16.7 6.9 14.6 Exports 43.2 37.7 27.7 24.5 26.2 28.2 26.3 24.8 23.6 18.8 13.3 Debt Accumulation Imports 47.5 48.0 36.0 35.7 43.7 44.9 40.5 38.2 37.3 34.2 30.0 10.0 70 Net current transfers (negative = inflow) -2.6 -1.5 -4.3 -4.7 -4.0 -3.5 -3.6 -3.5 -3.6 -3.8 -4.2 -6.7 -3.7 of which: official -3.7 -3.7 -4.7 -4.7 -3.6 -3.1 -2.5 -2.1 -2.1 -1.7 -1.6 9.0 60 Other current account flows (negative = net inflow) 1.2 0.9 -2.4 -1.5 -1.3 -1.1 -1.0 -1.1 -0.8 -1.1 -1.1 3.3 -1.1 8.0 Net FDI (negative = inflow) -1.0 -1.8 -0.4 -1.5 -2.8 -3.1 -2.8 -2.6 -2.6 -2.6 -2.3 -2.9 -2.6 7.0 50 Endogenous debt dynamics 2/ -0.3 0.1 0.2 0.1 0.0 -0.2 -0.2 -0.2 -0.2 -0.3 -0.5 Contribution from nominal interest rate 0.1 0.1 0.1 0.2 0.2 0.2 0.3 0.3 0.3 0.3 0.4 6.0 40 Contribution from real GDP growth -0.3 -0.1 0.3 0.0 -0.3 -0.4 -0.4 -0.5 -0.5 -0.7 -0.8 5.0 Contribution from price and exchange rate changes -0.2 0.1 -0.2 … … … … … … … … 30 Residual 3/ -1.9 -8.2 2.2 -2.5 -7.5 -6.9 -5.4 -5.0 -5.4 -6.7 -8.6 -1.4 -5.8 4.0 of which: exceptional financing 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 3.0 20 2.0 Sustainability indicators 10 PV of PPG external debt-to-GDP ratio ... ... 7.1 7.7 8.2 9.0 9.4 9.7 10.2 13.8 16.6 1.0 PV of PPG external debt-to-exports ratio ... ... 25.5 31.5 31.4 31.8 35.7 39.1 43.4 73.2 125.1 0.0 0 PPG debt service-to-exports ratio 1.1 1.4 1.5 1.8 1.8 2.5 3.5 3.0 2.1 2.9 7.5 2021 2023 2025 2027 2029 2031 PPG debt service-to-revenue ratio 1.6 2.0 1.7 2.0 2.1 2.9 3.7 3.0 2.1 2.4 4.5 Gross external financing need (Million of U.S. dollars) 39.3 132.8 25.3 66.2 174.6 185.3 160.5 154.4 171.2 281.4 681.2 Debt Accumulation Grant-equivalent financing (% of GDP) Key macroeconomic assumptions Grant element of new borrowing (% right sc ale) Real GDP growth (in percent) 3.9 1.2 -4.3 0.4 2.3 3.4 2.9 3.1 3.1 3.1 3.3 2.9 2.8 GDP deflator in US dollar terms (change in percent) 2.1 -1.5 2.9 6.4 4.5 4.1 4.4 4.2 4.1 4.0 4.2 3.4 4.3 Effective interest rate (percent) 4/ 1.2 1.5 1.6 1.9 2.0 1.9 1.8 1.8 1.6 1.5 1.5 1.9 1.7 External debt (nominal) 1/ Growth of exports of G&S (US dollar terms, in percent) 13.8 -13.1 -27.5 -5.6 14.5 15.8 0.0 1.3 2.2 2.5 4.5 5.6 3.7 of which: Private Growth of imports of G&S (US dollar terms, in percent) 10.0 0.6 -26.1 5.9 31.0 10.6 -3.1 1.2 4.9 6.0 6.6 0.8 7.0 25 Grant element of new public sector borrowing (in percent) ... ... ... 33.7 59.3 48.6 48.6 51.2 47.0 41.2 43.6 ... 45.4 Government revenues (excluding grants, in percent of GDP) 30.5 26.4 24.4 22.3 23.0 24.1 24.9 24.6 24.5 23.3 22.0 28.5 23.8 Aid flows (in Million of US dollars) 5/ 254.0 194.9 286.7 150.1 153.2 153.4 156.9 162.5 170.2 230.2 456.5 20 Grant-equivalent financing (in percent of GDP) 6/ ... ... ... 9.3 8.3 7.6 7.3 7.1 6.9 6.6 6.3 ... 7.3 Grant-equivalent financing (in percent of external financing) 6/ ... ... ... 88.4 88.2 82.2 82.5 84.9 84.4 81.7 81.7 ... 83.8 15 Nominal GDP (Million of US dollars) 1,575 1,570 1,546 1,652 1,766 1,902 2,044 2,195 2,355 3,332 6,736 Nominal dollar GDP growth 6.1 -0.3 -1.5 6.9 6.9 7.7 7.5 7.4 7.3 7.2 7.7 6.5 7.2 10 Memorandum items: PV of external debt 7/ ... ... 8.1 8.8 9.4 10.2 10.6 11.0 11.6 15.3 18.4 In percent of exports ... ... 29.2 36.0 35.8 36.1 40.5 44.4 49.1 81.4 138.3 5 Total external debt service-to-exports ratio 1.3 1.6 1.8 2.0 2.0 2.7 3.8 3.2 2.4 3.3 8.1 PV of PPG external debt (in Million of US dollars) 109.6 127.6 145.4 170.8 191.8 212.7 241.3 458.7 1118.7 0 (PVt-PVt-1)/GDPt-1 (in percent) 1.2 1.1 1.4 1.1 1.0 1.3 1.6 1.3 2021 2023 2025 2027 2029 2031 Non-interest current account deficit that stabilizes debt ratio 3.3 9.9 -2.1 3.8 10.4 10.2 8.3 7.8 8.3 9.7 11.4 Sources: Country authorities; and staff estimates and projections. 0 1/ Includes both public and private sector external debt. 2/ Derived as [r - g - ρ(1+g) + Ɛα (1+r)]/(1+g+ρ+gρ) times previous period debt ratio, with r = nominal interest rate; g = real GDP growth rate, ρ = growth rate of GDP deflator in U.S. dollar terms, Ɛ=nominal appreciation of the local currency, and α= share of local currency-denominated external debt in total external debt. 3/ Includes exceptional financing (i.e., changes in arrears and debt relief); changes in gross foreign assets; and valuation adjustments. For projections also includes contribution from price and exchange rate changes. 4/ Current-year interest payments divided by previous period debt stock. 5/ Defined as grants, concessional loans, and debt relief. 6/ Grant-equivalent financing includes grants provided directly to the government and through new borrowing (difference between the face value and the PV of new debt). 7/ Assumes that PV of private sector debt is equivalent to its face value. 8/ Historical averages are generally derived over the past 10 years, subject to data availability, whereas projections averages are over the first year of projection and the next 10 years. 11 >>> Actual Projections Average 6/ 2018 2019 2020 2021 2022 2023 2024 2025 2026 2031 2041 Historical Projections Public sector debt 1/ 8.3 8.2 13.1 16.2 18.3 20.7 23.1 25.6 28.3 39.0 64.3 11.1 27.9 Definition of external/domestic Residency- of which: external debt 6.3 6.1 9.6 10.7 12.4 14.2 15.5 16.5 17.5 22.1 25.4 8.6 17.2 debt based of which: local-currency denominated Change in public sector debt -0.1 -0.1 4.9 3.1 2.1 2.4 2.4 2.5 2.7 2.1 2.7 Is there a material difference Identified debt-creating flows -1.7 0.4 4.2 2.5 2.4 2.8 2.6 3.0 3.0 2.6 3.5 -1.8 2.7 Yes between the two criteria? Primary deficit -1.4 0.5 2.2 2.6 2.7 3.3 3.1 3.6 3.7 3.5 5.0 -1.1 3.3 Revenue and grants 40.4 32.8 33.2 30.9 29.7 30.1 30.7 30.4 30.2 28.8 27.2 41.0 29.9 of which: grants 9.9 6.4 8.8 8.6 6.7 6.1 5.8 5.8 5.7 5.6 5.2 Public sector debt 1/ Primary (noninterest) expenditure 39.0 33.3 35.5 33.5 32.4 33.4 33.9 33.9 33.9 32.3 32.2 39.8 33.2 Automatic debt dynamics -0.3 -0.1 0.2 0.0 -0.3 -0.5 -0.5 -0.6 -0.7 -0.9 -1.5 of which: local-currency denominated Contribution from interest rate/growth differential -0.4 -0.1 0.4 0.0 -0.3 -0.5 -0.5 -0.6 -0.7 -0.9 -1.5 of which: foreign-currency denominated of which: contribution from average real interest rate -0.1 0.0 0.0 0.0 0.1 0.1 0.1 0.1 0.1 0.2 0.5 of which: contribution from real GDP growth -0.3 -0.1 0.4 -0.1 -0.4 -0.6 -0.6 -0.7 -0.8 -1.1 -2.0 45 Contribution from real exchange rate depreciation 0.1 0.1 -0.2 ... ... ... ... ... ... ... ... 40 Other identified debt-creating flows 0.0 0.0 1.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.2 0.0 35 Privatization receipts (negative) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 30 Recognition of contingent liabilities (e.g., bank recapitalization) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 25 Debt relief (HIPC and other) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 20 Other debt creating or reducing flow (e.g. IMF loan) 0.0 0.0 1.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 15 Residual 1.6 -0.5 0.7 0.6 -0.3 -0.4 -0.2 -0.5 -0.3 -0.5 -0.8 0.8 -0.4 10 5 Sustainability indicators 0 PV of public debt-to-GDP ratio 2/ ... ... 10.5 13.3 14.1 15.5 17.0 18.8 21.1 30.7 55.5 2021 2023 2025 2027 2029 2031 PV of public debt-to-revenue and grants ratio … … 31.6 43.1 47.5 51.3 55.3 62.0 69.8 106.5 203.8 Debt service-to-revenue and grants ratio 3/ 2.1 3.1 3.8 4.2 5.0 6.0 6.7 6.8 6.0 6.1 16.6 Gross financing need 4/ -0.6 1.5 5.3 3.9 4.2 5.1 5.2 5.6 5.4 5.2 9.5 of which: held by residents of which: held by non-residents Key macroeconomic and fiscal assumptions 45 Real GDP growth (in percent) 3.9 1.2 -4.3 0.4 2.3 3.4 2.9 3.1 3.1 3.1 3.3 2.9 2.8 40 Average nominal interest rate on external debt (in percent) 0.7 1.1 1.1 1.5 1.7 1.6 1.5 1.6 1.4 1.3 1.3 1.0 1.4 35 Average real interest rate on domestic debt (in percent) -2.6 -1.0 2.1 0.5 1.2 1.6 1.4 1.6 1.6 1.8 1.6 -2.4 1.5 30 Real exchange rate depreciation (in percent, + indicates depreciation) 2.0 1.1 -3.6 … ... ... ... ... ... ... ... -1.9 ... 25 Inflation rate (GDP deflator, in percent) 2.9 1.3 3.4 4.2 4.5 4.1 4.4 4.2 4.1 4.0 4.2 3.5 4.1 20 Growth of real primary spending (deflated by GDP deflator, in percent) -0.4 -13.7 2.0 -5.1 -0.9 6.7 4.2 3.2 3.1 2.8 3.2 0.1 2.0 15 Primary deficit that stabilizes the debt-to-GDP ratio 5/ -1.3 0.6 -2.7 -0.6 0.6 0.9 0.7 1.1 1.0 1.4 2.3 -1.2 1.0 10 PV of contingent liabilities (not included in public sector debt) 0.0 0.0 0.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -0.2 5 0 2021 2023 2025 2027 2029 2031 Sources: Country authorities; and staff estimates and projections. 1/ Coverage of debt: The central government, central bank, government-guaranteed debt . Definition of external debt is Residency-based. 2/ The underlying PV of external debt-to-GDP ratio under the public DSA differs from the external DSA with the size of differences depending on exchange rates projections. 3/ Debt service is defined as the sum of interest and amortization of medium and long-term, and short-term debt. 4/ Gross financing need is defined as the primary deficit plus debt service plus the stock of short-term debt at the end of the last period and other debt creating/reducing flows. 5/ Defined as a primary deficit minus a change in the public debt-to-GDP ratio ((-): a primary surplus), which would stabilizes the debt ratio only in the year in question. 6/ Historical averages are generally derived over the past 10 years, subject to data availability, whereas projections averages are over the first year of projection and the next 10 years. 12 >>> Projections 1/ 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 PV of debt-to GDP ratio Baseline 7.7 8 9 9 10 10 11 12 12 13 13.8 A. Alternative Scenarios A1. Key variables at their historical averages in 2021-2031 2/ 8 3 0 -3 -6 -8 -11 -14 -16 -18 -21 0 #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A B. Bound Tests B1. Real GDP growth 8 9 10 10 11 11 12 13 14 15 15 B2. Primary balance 8 9 11 11 12 12 13 14 15 15 16 B3. Exports 8 13 23 23 23 23 24 24 25 25 25 B4. Other flows 3/ 8 12 17 17 18 18 18 19 19 20 20 B5. Depreciation 8 10 7 8 9 9 10 11 12 13 14 B6. Combination of B1-B5 8 14 16 16 17 17 18 18 19 19 20 C. Tailored Tests C1. Combined contingent liabilities 8 10 11 12 12 12 13 14 15 15 16 C2. Natural disaster 8 13 14 15 15 16 17 18 19 19 20 C3. Commodity price 8 10 13 13 13 14 14 14 14 14 14 C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Threshold 30 30 30 30 30 30 30 30 30 30 30 PV of debt-to-exports ratio Baseline 32 31 32 36 39 43 49 54 60 67 73 A. Alternative Scenarios A1. Key variables at their historical averages in 2021-2031 2/ 32 13 -2 -12 -23 -35 -48 -63 -78 -93 -109 0 32 29 29 31 32 35 38 42 45 49 53 B. Bound Tests B1. Real GDP growth 32 31 32 36 39 43 49 54 60 67 73 B2. Primary balance 32 35 39 44 48 52 58 64 70 77 84 B3. Exports 32 70 161 173 183 194 207 221 235 248 257 B4. Other flows 3/ 32 48 61 66 71 76 81 88 94 100 105 B5. Depreciation 32 31 21 25 28 32 37 42 48 54 61 B6. Combination of B1-B5 32 63 52 88 94 101 110 119 129 138 146 C. Tailored Tests C1. Combined contingent liabilities 32 39 40 44 48 53 58 64 71 77 84 C2. Natural disaster 32 51 52 58 64 70 78 86 94 103 112 C3. Commodity price 32 46 52 56 58 60 63 67 71 75 78 C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Threshold 140 140 140 140 140 140 140 140 140 140 140 13 >>> Projections 1/ 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 Debt service-to-exports ratio Baseline 2 2 2 4 3 2 2 2 3 3 3 A. Alternative Scenarios A1. Key variables at their historical averages in 2021-2031 2/ 2 2 2 3 2 1 1 0 0 -1 -2 0 2 2 2 3 3 2 2 2 2 1 1 B. Bound Tests B1. Real GDP growth 2 2 2 4 3 2 2 2 3 3 3 B2. Primary balance 2 2 3 4 3 2 2 2 3 3 4 B3. Exports 2 3 6 9 8 6 7 7 7 10 14 B4. Other flows 3/ 2 2 3 4 4 3 3 3 3 4 5 B5. Depreciation 2 2 2 3 3 2 2 2 2 2 2 B6. Combination of B1-B5 2 2 4 6 5 4 4 4 5 6 7 C. Tailored Tests C1. Combined contingent liabilities 2 2 3 4 3 2 2 2 3 3 3 C2. Natural disaster 2 2 3 4 4 3 3 3 3 3 4 C3. Commodity price 2 2 3 4 4 3 3 3 3 3 4 C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Threshold 10 10 10 10 10 10 10 10 10 10 10 Debt service-to-revenue ratio Baseline 2 2 3 4 3 2 2 2 2 2 2 A. Alternative Scenarios A1. Key variables at their historical averages in 2021-2031 2/ 2 2 3 3 2 1 1 0 0 -1 -2 0 2 2 3 4 3 2 2 1 2 1 1 B. Bound Tests B1. Real GDP growth 2 2 3 4 3 2 2 2 2 2 3 B2. Primary balance 2 2 3 4 3 2 2 2 2 3 3 B3. Exports 2 2 4 5 4 3 3 3 3 4 6 B4. Other flows 3/ 2 2 3 4 4 3 3 3 3 3 4 B5. Depreciation 2 3 4 4 4 2 2 2 3 3 2 B6. Combination of B1-B5 2 2 4 5 4 3 3 3 3 4 4 C. Tailored Tests C1. Combined contingent liabilities 2 2 3 4 3 2 2 2 2 2 3 C2. Natural disaster 2 2 3 4 3 2 2 2 3 3 3 C3. Commodity price 2 2 3 5 4 3 2 2 2 3 3 C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Threshold 14 14 14 14 14 14 14 14 14 14 14 Sources: Country authorities; and staff estimates and projections. 1/ A bold value indicates a breach of the threshold. 2/ Variables include real GDP growth, GDP deflator (in U.S. dollar terms), non-interest current account in percent of GDP, and non-debt creating flows. 3/ Includes official and private transfers and FDI. 14 >>> Projections 1/ 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 PV of Debt-to-GDP Ratio Baseline 13 14 15 17 19 21 23 25 27 29 31 A. Alternative Scenarios A1. Key variables at their historical averages in 2021-2031 2/ 13 11 9 8 6 6 4 3 2 1 1 0 #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A B. Bound Tests B1. Real GDP growth 13 16 20 24 28 32 36 40 44 48 51 B2. Primary balance 13 17 20 22 23 26 28 29 31 33 35 B3. Exports 13 19 28 29 31 33 34 36 38 39 40 B4. Other flows 3/ 13 18 24 25 27 29 30 32 34 35 37 B5. Depreciation 13 15 14 14 14 15 16 17 18 18 19 B6. Combination of B1-B5 13 15 17 17 19 21 23 25 26 28 30 C. Tailored Tests C1. Combined contingent liabilities 13 20 21 22 24 26 28 30 31 33 35 C2. Natural disaster 13 26 27 29 31 33 36 38 40 42 44 C3. Commodity price 13 16 21 27 32 38 42 47 50 54 58 C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. TOTAL public debt benchmark 35 35 35 35 35 35 35 35 35 35 35 PV of Debt-to-Revenue Ratio Baseline 43 48 51 55 62 70 77 85 92 99 107 A. Alternative Scenarios A1. Key variables at their historical averages in 2021-2031 2/ 43 38 31 26 21 18 15 11 8 5 2 0 4 5 9 9 9 8 8 8 8 9 9 B. Bound Tests B1. Real GDP growth 43 53 66 76 90 105 119 133 147 161 174 B2. Primary balance 43 56 68 71 77 85 92 100 107 113 121 B3. Exports 43 63 93 95 101 108 115 122 128 134 139 B4. Other flows 3/ 43 62 79 82 88 95 102 109 116 122 127 B5. Depreciation 43 50 47 46 48 51 54 58 61 65 69 B6. Combination of B1-B5 43 52 56 55 61 69 76 83 90 97 105 C. Tailored Tests C1. Combined contingent liabilities 43 66 68 71 78 85 92 100 107 114 121 C2. Natural disaster 43 86 89 93 101 110 119 127 136 144 152 C3. Commodity price 43 58 75 93 111 128 143 156 170 184 199 C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Debt Service-to-Revenue Ratio Baseline 4 5 6 7 7 6 6 6 6 6 6 A. Alternative Scenarios A1. Key variables at their historical averages in 2021-2031 2/ 4 5 5 5 4 3 2 1 1 1 0 0 4 5 9 9 9 8 8 8 8 9 9 B. Bound Tests B1. Real GDP growth 4 5 7 9 9 8 8 9 9 9 10 B2. Primary balance 4 5 7 9 8 7 7 6 7 7 7 B3. Exports 4 5 6 8 8 7 6 6 7 7 9 B4. Other flows 3/ 4 5 6 7 7 6 6 6 6 7 8 B5. Depreciation 4 5 6 7 7 6 6 5 6 5 5 B6. Combination of B1-B5 4 5 6 7 7 6 6 6 6 6 6 C. Tailored Tests C1. Combined contingent liabilities 4 5 9 8 8 7 6 6 7 7 7 C2. Natural disaster 4 5.1 12.0 9 9 8 8 8 8 8 8 C3. Commodity price 4 5 7 9 10 10 10 10 10 11 11 C4. Market Financing n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Sources: Country authorities; and staff estimates and projections. 15 >>> PV of debt-to GDP ratio PV of debt-to-exports ratio 35 300 30 250 Most extreme shock: Exports 25 200 20 150 15 100 10 5 Most extreme shock: Exports 50 0 0 2021 2023 2025 2027 2029 2031 2021 2023 2025 2027 2029 2031 Debt service-to-exports ratio Debt service-to-revenue ratio 16 16 14 14 12 12 Most extreme shock: Exports 10 10 8 8 6 6 4 4 2 2 Most extreme shock: Exports 0 0 2021 2023 2025 2027 2029 2031 2021 2023 2025 2027 2029 2031 Baseline Historical scenario Most extreme shock 1/ Threshold Natural Disaster Shock Borrowing assumptions on additional financing needs resulting from the stress Customization of Default Settings tests* Size Interactions Default User defined Shares of marginal debt No No External PPG MLT debt 100% Tailored Stress Terms of marginal debt Combined CL No Avg. nominal interest rate on new borrowing in USD 1.2% 1.2% Natural disaster Yes Yes USD Discount rate 5.0% 5.0% Commodity price No No Avg. maturity (incl. grace period) 29 29 Market financing n.a. n.a. Avg. grace period 7 7 Note: "Yes" indicates any change to the size or * Note: All the additional financing needs generated by the shocks under the stress tests interactions of the default settings for the stress tests. are assumed to be covered by PPG external MLT debt in the external DSA. Default terms "n.a." indicates that the stress test does not apply. of marginal debt are based on baseline 10-year projections. Sources: Country authorities; and staff estimates and projections. 1/ The most extreme stress test is the test that yields the highest ratio in or before 2031. The stress test with a one-off breach is also presented (if any), while the one-off breach is deemed away for mechanical signals. When a stress test with a one-off breach happens to be the most exterme shock even after disregarding the one-off breach, only that stress test (with a one-off breach) would be presented. 2/ The magnitude of shocks used for the commodity price shock stress test are based on the commodity prices outlook prepared by the IMF research department. 16 >>> / PV of Debt-to-GDP Ratio 70 60 Most extreme shock: Commodity price 50 40 30 20 10 0 2021 2023 2025 2027 2029 2031 PV of Debt-to-Revenue Ratio Debt Service-to-Revenue Ratio 250 14 Most extreme shock: Commodity price Most extreme shock: Commodity price 12 200 10 150 8 6 100 4 50 2 0 0 2021 2023 2025 2027 2029 2031 2021 2023 2025 2027 2029 2031 Baseline Most extreme shock 1/ TOTAL public debt benchmark Historical scenario Natural disaster Borrowing assumptions on additional financing needs resulting from the Default User defined stress tests* Shares of marginal debt External PPG medium and long-term 51% 51% Domestic medium and long-term 39% 39% Domestic short-term 10% 10% Terms of marginal debt External MLT debt Avg. nominal interest rate on new borrowing in USD 1.2% 1.2% Avg. maturity (incl. grace period) 29 29 Avg. grace period 7 7 Domestic MLT debt Avg. real interest rate on new borrowing 2.0% 2.0% Avg. maturity (incl. grace period) 14 14 Avg. grace period 13 13 Domestic short-term debt Avg. real interest rate -3.1% -3.1% * Note: The public DSA allows for domestic financing to cover the additional financing needs generated by the shocks under the stress tests in the public DSA. Default terms of marginal debt are based on baseline 10-year projections. Sources: Country authorities; and staff estimates and projections. 1/ The most extreme stress test is the test that yields the highest ratio in or before 2031. The stress test with a one-off breach is also presented (if any), while the one-off breach is deemed away for mechanical signals. When a stress test with a one-off breach happens to be the most exterme shock even after disregarding the one-off breach, only that stress test (with a one-off breach) would be presented. 17 >>> Gross Nominal PPG External Debt Debt-creating flows Unexpected Changes in Debt 1/ (in percent of GDP; DSA vintages) (percent of GDP) (past 5 years, percent of GDP) Current DSA 40 80 Residu al 20 Previous DSA proj . 70 DSA-2 016 In terqu artile Price a nd 20 15 ran ge (2 5-75 ) 60 exch an ge rate 50 Real GDP 10 gro wt h 0 Cha ng e in PPG 40 debt 3/ 5 Nomina l 30 interest rate -20 20 0 Med ia n Current 10 acco un t + FDI -5 -40 0 Change in 5-year 5-year 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 PP G d ebt 3/ Contribution of Distribution across LICs 2/ historical projected -1 0 unexpected change change Public debt Gross Nominal Public Debt Debt-creating flows Unexpected Changes in Debt 1/ (in percent of GDP; DSA vintages) (percent of GDP) (past 5 years, percent of GDP) Residu al 20 Current DSA 20 Previous DSA proj. DSA-2 016 Other debt Interquartile 80 creatin g f lows ran ge (2 5-75 ) 15 70 10 Rea l 60 Exch an ge 10 rate de precia tion 50 Real GDP growth 5 Change in debt 40 0 30 Real interest 0 rate 20 Primary def icit -5 10 -10 Med ia n 0 -10 Chan ge in debt 5-year 5-year 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 Distribution across LICs 2/ historical projected Contribution of change change -15 unexpected 1/ Dif f erence betw een anticipated and actual contributions on debt ratios. 2/ Distribution across LICs f or w hich LIC DSAs w ere produced. 3/ Given the relatively low private external debt f or average low -income countries, a ppt change in PPG external debt should be largely explained by the drivers of the external debt dynamics equation. 18 >>> 3-Year Adjustment in Primary Balance Fiscal Adjustment and Possible Growth Paths 1/ (Percentage points of GDP) Distribution 1/ 8 0 14 Projected 3-yr 6 12 adjustment 3-year PB adjustment greater In percentage points of GDP 10 than 2.5 percentage points of 4 GDP in approx. top quartile In percent 2 8 6 0 4 -2 2 -4 0 -6 -1 more 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 6.0 6.5 7.0 7.5 8.0 -4.5 -4.0 -3.5 -3.0 -2.5 -2.0 -1.5 -1.0 -0.5 2015 2016 2017 2018 2019 2020 2021 2022 2023 Baseline Multiplier = 0.2 Multiplier = 0.6 Multiplier = 1 1/ Data cover Fund-supported programs for LICs (excluding emergency financing) 1/ Bars refer to annual projected fiscal adjustment (right-hand side scale) and lines show approved since 1990. The size of 3-year adjustment from program inception is found on possible real GDP growth paths under different fiscal multipliers (left-hand side scale). the horizontal axis; the percent of sample is found on the vertical axis. 19 >>> PV of debt-to GDP ratio PV of debt-to-exports ratio 35 160 30 140 Threshold 120 25 (1-X)*Threshold 100 20 (1-Y)*&Threshold 80 15 60 10 40 5 20 0 0 2021 2023 2025 2027 2029 2031 2021 2023 2025 2027 2029 2031 Debt service-to-exports ratio Debt service-to-revenue ratio 12 16 14 10 12 8 10 6 8 6 4 4 2 2 0 0 2021 2023 2025 2027 2029 2031 2021 2023 2025 2027 2029 2031 Some Substantial Threshold Baseline Limited space space space Sources: Country authorities; and staff estimates and projections. 1/ For the PV debt/GDP and PV debt/exports thresholds, x is 20 percent and y is 40 percent. For debt service/Exports and debt service/revenue thresholds, x is 12 percent and y is 35 percent. 20 >>>