CHAPTER 2 – Fiscal cum Debt Sustainability: An Analytical Approach by Sam Omoruyi

Introduction
Debt sustainability analysis was the core objective in the design of the HIPC Initiative (1996, 1999) for low income countries. At that time, sustainability analysis was confined largely to an external transfer problem (liquidity problem) considering that in those low income countries, public debt was identified by and large with external borrowing with little domestic debt component. However, in recent years, attention has turned increasingly towards debt sustainability in emerging market economies.
In those countries, the identity between public and external debt no longer holds, given the growing importance of public domestic debt and private external debts. In the emerging markets, domestic debt on average accounts for more than halt of total public debt. The share of the private sector in total external debt has ballooned over the years as well.