Total Public Debt Sustainability: Empirical Assessment of the Solvency Issue in the Case of Kyrgyz Republic

Abstract

The paper analyses the total public debt of the Kyrgyz Republic in terms of solvency criterion. The recent development of total public debt to GDP ratios as well as sharp increase of fiscal deficit increases the attention of international investors to the issue of total public debt sustainability of the Kyrgyz Republic. Different methodologies in order to assess whether the country satisfies solvency criterion of the sustainability was implemented including fiscal reaction function, the debt stabilizing primary balance over/under-borrowing test and the stress test. The main finding of the paper is that total public debt to GDP ratio in the Kyrgyz Republic is sustainable in the 2012, but the country still has the moderate risk of debt distress. The assessing methods all faces the issue of uncertainty, therefore the probability of over/under-estimation of the results exists.