Define debt sustainability in macro development context.

Define debt sustainability in macro development context.

• A. The total level of external debt divided by the population.
• B. Debt remains manageable relative to GDP and export earnings.
• C. The ability to borrow unlimited funds without interest.
• D. The commitment to pay only interest on debt.

Answer: (B)

Debt sustainability in macro development means whether a country can continue to meet its debt service payments—both principal and interest—without compromising growth or macro stability. It focuses on whether the debt burden can be supported by the economy’s income, especially when measured against the economy’s size (GDP) and its ability to earn foreign exchange through exports. When the debt stock grows in line with GDP and export earnings, the country can realistically service the debt over time; when it grows faster, debt becomes unsustainable.

That’s why this option fits best: debt remains manageable relative to GDP and export earnings. It captures the idea that sustainability is about the balance between what the economy can generate and what must be paid, not just the total debt level alone.

The other ideas don’t fit as well. Looking at external debt per person doesn’t reflect the economy’s overall capacity to service it. Imagining you can borrow unlimited funds ignores the costs of servicing debt. Focusing on paying only interest ignores the principal that must be repaid over time.