Debt is not inherently an economic problem. It is a standard instrument for financing infrastructure, social policies, and major investments. For a developing country, debt can even accelerate economic transformation when it finances high-yield projects. The key issue, therefore, is not the nominal volume of the debt, but its sustainability.

International financial institutions assess this sustainability using several indicators. The debt-to-GDP ratio provides an initial measure of the overall debt burden relative to the size of the economy. However, it is not sufficient. A country with strong growth can support a higher level of debt than a stagnant economy.

The analysis also focuses on the debt-to-public-revenue ratio and, above all, on the weight of debt servicing in the budget.

The risk becomes more tangible when interest and principal repayments absorb a growing share of tax revenue. If debt servicing, for example, consumes more than a quarter or a third of government revenue, fiscal space is automatically reduced. Spending on education, healthcare, or infrastructure may be cut to meet debt obligations. This situation increases vulnerability to external shocks.

The structure of the debt also plays a crucial role. Debt primarily denominated in foreign currency exposes the debtor to exchange rate fluctuations. A depreciation of the national currency immediately increases the cost of repayment.

Similarly, a high proportion of variable-rate loans makes public finances sensitive to increases in international interest rates.

The systemic nature of the risk emerges when debt affects not only the budget, but the entire economy. A loss of investor confidence can increase the cost of financing, reduce access to markets, and lead to abrupt fiscal adjustments.

Local banks, often holders of sovereign bonds, can also be weakened in the event of tensions over public debt.

Sustainability therefore depends on a combination of factors: debt levels, growth dynamics, the quality of financed expenditures, and the structure of borrowing. Debt directed towards productive investments likely to broaden the future tax base strengthens repayment capacity.

Conversely, debt intended to finance current expenses increases pressure without generating additional resources.

The threshold at which debt becomes a systemic risk is not universal. It depends on the macroeconomic context, fiscal credibility, and institutional resilience.

Vigilance is essential when debt growth consistently outpaces economic growth and debt servicing absorbs an excessive share of public revenue. It is at this point that financial constraints can become a lasting obstacle to development.