Practice Drills: Modeling a Debt Sustainability Scenario for a Sovereign

A hands-on drill course for macro investors, fund managers and senior finance professionals who want to stop quoting other people's debt sustainability conclusions and start producing their own. You build one model, for India's general government, and use it in every drill. First you lay out the workbook, pull baseline inputs from the Union Budget, RBI and IMF sources, and decide what counts as debt. Then you code the debt dynamics equation year by year, back out the effective interest rate, solve for the debt-stabilising primary balance and reconcile your model to reported debt with stock-flow adjustments. You project a five-year baseline, compute gross financing needs, then shock it: growth, interest rate, primary balance, currency, contingent liability and combined scenarios, finishing with a Monte Carlo fan chart in Python. Finally you read the results as a heat map, test the model on Sri Lanka before its 2022 default, and write the scenario note an investment committee would actually read. All figures in INR with Indian sources.