PUBLIC DEBT SUSTAINABILITY AND ECONOMIC GROWTH: A COMPARATIVE STUDY OF DEVELOPING AND DEVELOPED COUNTRIES
DOI:
https://doi.org/10.66795/jafep44Keywords:
public debt, debt sustainability, economic growth, developing countries, developed countries, fiscal spaceAbstract
Public debt sustainability has become a central macroeconomic concern as countries face repeated shocks, higher interest rates, and growing development needs. This study compares how public debt affects economic growth in developing versus developed economies, emphasizing fiscal space, borrowing costs, institutional quality, and the credibility of policy frameworks. Drawing on debt sustainability concepts used by the IMF and World Bank, the paper explains why similar debt-to-GDP ratios can lead to different growth outcomes across country groups. We propose a comparative analytical framework that links debt dynamics to growth through interest-growth differentials, crowding-out channels, exchange rate risk, and governance capacity. The study concludes that debt is most growth enhancing when it finances productivity-raising investment, when fiscal institutions credibly anchor deficits, and when rollover/refinancing risks are contained—conditions that are typically stronger in advanced economies.
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Copyright (c) 2025 Muhammad Bilal Khan , Sana Rauf (Author)
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