There are several technical indicators of fiscal sustainability that stem from a forward-looking approach, and build on the sustainability concept developed in paragraph 5.7. There is no comprehensive indicator of sustainability, and all have strengths and weaknesses.
One such indicator is the fiscal gap. It is defined as the permanent spending decrease or revenue increase that would be necessary to ensure a specified debt-to-GDP constraint is met at the end of a projection horizon. It obviously depends on the initial and desired target ratios and the time horizon, but it will largely be driven by the forward-looking projected primary balance.
Another indicator of interest is the inter-temporal budget constraint (IBC). This states that all current and future revenue streams should be sufficient to cover all current and future spending streams and today’s debt. If current and future revenues are insufficient, the extent of the imbalance is called the ‘inter-temporal budget gap’ (IBG). This represents the amount of fiscal tightening that would be required to meet the IBC.