In the context of public debt, the 'Domar Condition' for debt sustainability relates to:
A. Only the level of absolute debt
B. Only external debt
C. The relationship between the interest rate, growth rate and primary balance
D. Only the maturity structure of debt
Answer: Option C
Solution (By JKSSB Mock Tests)
The Domar condition indicates that the debt-to-GDP ratio will stabilise or decline if the primary surplus is sufficient relative to the difference between the interest rate and the growth rate of GDP.
Explanation:
Soft loans are provided by multilateral agencies or governments at below-market interest rates with longer maturities and grace periods, often for development purposes.
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