ENDEUDAMIENTO MÁXIMO SOSTENIBLE SIN RIESGO DE IMPAGO DEL SECTOR PÚBLICO NO FINANCIERO: EL CASO DE ECUADOR

Abstract

High public debt has always been present in the non-financial public sector of several Latin American economies. For Ecuador, debt is the only way to finance expenses when there is a fiscal deficit. This reality creates a strong dependency between the ability to fill the fiscal gap and the willingness of creditors to invest in sovereign debt. Therefore, the objective of this study is to estimate the maximum level at which public debt must be maintained so that it is sustainable and without risk of default. For this, a calibration model was used, using the following variables: GDP Growth Rate, Primary Surplus, Risk-Free Interest Rate of the United States Treasury Bonds (5 years) and Debt to GDP Ratio. The results showed that, for the debt to be sustainable without risk of default, it must reach a maximum of 34.8%, considering a primary surplus of 4%. Furthermore, with 57% of current indebtedness, the growth necessary to avoid default must be 7.68% per year; therefore, the estimated probability of default implicit is 98.24%. Consequently, there is an unsustainable over-indebtedness which will cause, in 5 years, ceteris paribus, the partial or total default of the public debt to be declared.