Prerequisites for sustainable government borrowing within currency board system

Financial stability of an economy is one of the most important priorities in many countries around the world. Although in many cases financial resources are preferably generated within a given economy, often there is a necessity to borrow the funds abroad. In order to maintain the sustainability of the economy, the borrowing abroad also should comply with the certain respective regulations. Specific regulations depend on the peculiarities of the economy itself. There is a complex set of the factors to be considered when analyzing the sustainability of the economy. In this article, the importance of the monetary system arrangement is emphasized, namely the case of currency board system is analyzed. The aim of the paper is to reveal the prerequisites for sustainable government borrowing within currency board system. The main research methods used are systematization and generalization of the scientific literature, quantitative and qualitative analysis of the primary and secondary data, graphic presentation of the data and results. Also the case of Lithuania’s government borrowing is presented. For the evaluation of risk, @Risk package has been used. Conclusions of the paper provide the review of both general and the specific prerequisites for sustainable government borrowing within currency board system. The case study showed that given current government debt management policy and based on an assumption that in similar circumstances economy can perform similarly, it can be stated that in the long run Lithuania’s borrowing can be considered as having the attributes of sustainability