1. Introduction Sovereign debt sustainability refers to the capacity of a sovereign state to meet its scheduled debt commitments, given relevant economic, social, and political constraints. When debt is not sustainable, it needs to be restructured. Failing to restructure unsustainable debts is detrimental both for the debtor and its creditors. Without such restructuring, there will be contractionary economic policies that typically induce recessions in economic activity, many of which are deep, depressing tax revenues and possibly even increasing the burden of debt in relation to output. 1 Unsustainable debt burdens entail efficiency losses, not only as a result of the reduction in aggregate demand, but because of distortions in incentives, especially when the debt overhang is severe(Krugman, 1988). These adverse effects may be so large that even creditors(as a group) can benefit from granting debt relief, 2 as relief under certain circumstances increases both output and the expected payments for creditors. In less technical terms: failing to restructure debt when it is unsustainable shrinks the size of the pie to be distributed between the debtor and the creditors. The assessment of debt sustainability is done through debt sustainability analyses(DSAs). The practice of sovereign DSA influences debt negotiations and restructuring outcomes, with potentially large economic, social, and political consequences. DSAs influence how much debt restructuring occurs and when it occurs. Because there is inevitably uncertainty about the future evolution of the economy, there is uncertainty about whether the country’s debt is sustainable. An overly optimistic DSA may entail more IMF lending and less debt write-down by private parties, with the result that there will be another crisis down the road. By then, some of the private creditors will have taken advantage of the temporary respite to withdraw their funds – making the resolution of the debt crisis even costlier. This, in turn, means that the economy’s prospects are diminished from what they otherwise would have been. In short, there are real economic and distributional consequences to a DSA, and that inevitably means that politics and power will matter(cf. Guzman, Colodenco, and Wiedenbrug, 2024). In the discussion below, we will illustrate how this plays out in the implementation of DSAs – creating quandaries for the staff and board of the IMF. As we shall show, this in turn often leads to intellectual inconsistencies in the practice of DSAs: assumptions, for instance, about interest rates or market access which are not themselves consistent with the hypothesized evolution of the economy. None of this should be a surprise: if the IMF grants loans based on power but is restricted to the fulfilment of certain bureaucratic rules concerning DSAs(such as the rule that states that the IMF can only make a loan if, with the loan and the associated policies, the country’s debt is sustainable, with a high probability) the DSAs will bend to power(that is, the assumptions made in the DSA will be those that ensure that the country is eligible for the loan). A deeper understanding of the practice of DSAs, which this paper attempts to provide, may not only help the IMF develop better lending practices – with a lower probability of one crisis being followed by another – but also help developing countries and emerging countries in crises achieve the deeper restructurings they need to restore long-term economic growth and prosperity. 2. What is a DSA? 1 See the revision of cases of fiscal adjustment over the recent history(Jayadev and Konczal, 2010, 2015), as well as Guzman and Stiglitz (2020), Stiglitz and Heymann(2014), and Stiglitz(2015) on the mechanisms that relate unsustainable debts to macroeconomic performance. 2 We emphasize that it is in the interests of the creditors as a whole: intra-creditor fights contribute greatly to a delay in restructuring and to restructurings being too small. See Guzman, Ocampo, and Stiglitz(2016). Series: Debt Sustainability Assessments& Their Role in the International Financial Architecture 1