This study analyzes the recent decline in government debt-to-GDP ratios observed in major economies during 2021-2023 by employing the fiscal debt dynamics identity to assess the relative contributions of various stabilization mechanisms highlighted in prior research. The results indicate that the reduction in debt ratios over this period was primarily driven by improved GDP
growth and higher inflation, rather than by fiscal consolidation measures such as austerity or tax increases. However, given that debt ratio improvements are influenced by the initial level of government debt, that sustained high inflation is difficult to maintain, and that changes in the debt ratio were largely unrelated to the government’s actual repayment capacity as reflected in the government
asset-to-debt ratio, the observed decline in debt ratios cannot be equated with an improvement in fiscal soundness. For effective fiscal sustainability management, policy should not only focus on the debt-to-GDP ratio but also on improving or maintaining the government asset-to-debt ratio at a manageable level.