CAREC Institute and EFSD Successfully Conclude Policy Dialogue on Debt and Financial Sustainability
On 13 May 2025, The CAREC Institute, in partnership with the Eurasian Fund for Stabilization and Development (EFSD), successfully held a webinar on “Debt and Financial Sustainability in the EFSD and CAREC Regions.” The dialogue built on the recent outcomes of the Residential Workshop on Debt Sustainability, a joint EFSD-CAREC Institute paper on country-level interest rate risk impact on debt and fiscal sustainability, and the EFSD’s working paper “Assessment of the Potential Impact of Natural Hazard Events on Debt Sustainability of Armenia, Kyrgyzstan, and Tajikistan.” These findings formed the foundation for in-depth expert discussions on enhancing debt management and fiscal strategies.
Dr. Ghulam Samad, Chief of Research Division of the CAREC Institute presented joint research emphasizing the need for stronger fiscal frameworks and targeted reforms. He stressed the importance of domestic resource mobilization and accurate debt tracking. Emphasis was placed on examining the effects of government liabilities with floating interest rates on debt and fiscal sustainability. It was observed that the interest rate risk levels in the analyzed countries remain within ranges that support the maintenance of public debt sustainability. Additionally, most countries possess the capacity to optimize debt servicing costs and mitigate risks to debt sustainability by leveraging domestic liabilities with floating rates and inflation-indexed instruments.
EFSD analysts presented an innovative methodology for evaluating the potential impact of natural disasters on countries’ debt sustainability. Through case studies of Armenia, the Kyrgyz Republic, and Tajikistan, various geographical, climatic, and other factors that could intensify debt risks were examined. This approach facilitates the assessment of natural disasters’ effects on key macroeconomic and debt indicators and aids in devising preventive strategies to minimize financial losses.
During the panel discussion, Ms. Neda Mukhtar, Publication Management Specialist at the Asian Development Bank (ADB), highlighted the critical need for tax reform, enhanced performance of state-owned enterprises, and the development of export strategies. Mr. Norbert Funke, Director of the Capacity Development and Technical Assistance Center, emphasized the complexities involved in long-term debt forecasting and introduced tools from the International Monetary Fund for analyzing the connections between debt and economic growth.
Mr. David Knight, Lead Economist and Program Leader at the World Bank, cautioned against neglecting long-term development goals in debt planning. Echoing this sentiment, Mr. Juan Pradelli, a consultant with the Multilateral Cooperation Center for Development Finance, stressed the importance of aligning debt strategies with the SDGs. Additionally, Mr. Feng Beilin, Senior Researcher at the Chinese Academy of Fiscal Sciences, called for a comprehensive approach to public debt measurement that includes state-owned enterprises and advocated for improved tax administration. Mr. Hamza Ali Malik, Director of Macroeconomic Policy and Financing for Development Division at the UNESCAP, drew on his central banking experience to underscore the significance of sound fiscal policies in managing debt risks.
The insights shared during the panel discussion illuminated several critical policy recommendations essential for addressing the challenges countries face in managing their debt. A recurring theme was the necessity for regional collaboration, as panelists emphasized the importance of continued cooperation among nations to tackle shared challenges and unique circumstances affecting debt sustainability.
Sound fiscal management was identified as a cornerstone of effective debt management, with discussions highlighting the need for countries to adequately prepare for potential risks associated with interest rate fluctuations and external shocks. A holistic approach to debt sustainability was advocated, focusing on broader economic reforms that enhance supply capacity, domestic revenue mobilization, and export potential—strategies vital for fostering long-term economic resilience.
Furthermore, the experts stressed the importance of strengthening existing frameworks to withstand future challenges, including the reinforcement of fiscal and legal structures that support sustainable development. Stronger debt management practices were deemed essential, particularly concerning market risks and the effective use of various financial instruments.
The policy dialogue underscored the necessity for policy reforms that extend beyond traditional debt management. By implementing these reforms, countries can bolster their economic resilience and growth potential, paving the way for a more sustainable financial future.